Guangdong Songfa Ceramics Co.,Ltd.'s (SHSE:603268) market cap dropped CN¥186m last week; Private companies bore the brunt

Key Insights

• The considerable ownership by private companies in Guangdong Songfa CeramicsLtd indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 51% of the company
• Insider ownership in Guangdong Songfa CeramicsLtd is 27%

Every investor in Guangdong Songfa Ceramics Co.,Ltd. (SHSE:603268) should be aware of the most powerful shareholder groups. With 36% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 11% decline in share price, private companies suffered the most losses.

Let's delve deeper into each type of owner of Guangdong Songfa CeramicsLtd, beginning with the chart below.

Check out our latest analysis for Guangdong Songfa CeramicsLtd

What Does The Institutional Ownership Tell Us About Guangdong Songfa CeramicsLtd?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Since institutions own only a small portion of Guangdong Songfa CeramicsLtd, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Hedge funds don't have many shares in Guangdong Songfa CeramicsLtd. Our data shows that Hengli Group Co.,Ltd is the largest shareholder with 30% of shares outstanding. With 21% and 6.0% of the shares outstanding respectively, Dao fan Lin and Zhuang Chao Liu are the second and third largest shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Guangdong Songfa CeramicsLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of Guangdong Songfa Ceramics Co.,Ltd.. It has a market capitalization of just CN¥1.5b, and insiders have CN¥422m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Guangdong Songfa CeramicsLtd. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 36%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangdong Songfa CeramicsLtd , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.