Individual investors invested in Guoguang Electric Company Limited (SZSE:002045) copped the brunt of last week's CN¥706m market cap decline

Key Insights

• Guoguang Electric's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 43% of the business is held by the top 25 shareholders
• 14% of Guoguang Electric is held by Institutions

Every investor in Guoguang Electric Company Limited (SZSE:002045) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual investors with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, individual investors as a group endured the highest losses last week after market cap fell by CN¥706m.

In the chart below, we zoom in on the different ownership groups of Guoguang Electric.

Check out our latest analysis for Guoguang Electric

What Does The Institutional Ownership Tell Us About Guoguang Electric?

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.

We can see that Guoguang Electric does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Guoguang Electric's historic earnings and revenue below, but keep in mind there's always more to the story.

Guoguang Electric is not owned by hedge funds. Our data shows that Shenzhen Zhidu Guoguang Investment Development Co., Ltd. is the largest shareholder with 11% of shares outstanding. Genimous Technology Co., Ltd. is the second largest shareholder owning 9.8% of common stock, and Guoguang Electric Company Limited., ESOP holds about 3.2% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Guoguang Electric

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Guoguang Electric Company Limited insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It has a market capitalization of just CN¥6.9b, and the board has only CN¥48m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 56% of Guoguang Electric. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 16%, of the Guoguang Electric stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

It appears to us that public companies own 11% of Guoguang Electric. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Guoguang Electric better, we need to consider many other factors. Take risks for example - Guoguang Electric has 1 warning sign we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com