Individual investors in Jiangsu Lianfa Textile Co.,Ltd (SZSE:002394) are its biggest bettors, and their bets paid off as stock gained 11% last week

Key Insights

• Significant control over Jiangsu Lianfa TextileLtd by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 14 investors have a majority stake in the company with 50% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Jiangsu Lianfa Textile Co.,Ltd (SZSE:002394), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 49% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, individual investors benefitted the most after the company's market cap rose by CN¥249m last week.

Let's take a closer look to see what the different types of shareholders can tell us about Jiangsu Lianfa TextileLtd.

Check out our latest analysis for Jiangsu Lianfa TextileLtd

What Does The Institutional Ownership Tell Us About Jiangsu Lianfa TextileLtd?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Jiangsu Lianfa TextileLtd. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Jiangsu Lianfa TextileLtd, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Jiangsu Lianfa TextileLtd. Jiangsu Lianfa Group Ltd. is currently the largest shareholder, with 40% of shares outstanding. For context, the second largest shareholder holds about 3.0% of the shares outstanding, followed by an ownership of 1.1% by the third-largest shareholder.

After doing some more digging, we found that the top 14 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Jiangsu Lianfa TextileLtd

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Jiangsu Lianfa Textile Co.,Ltd in their own names. 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¥2.6b, and the board has only CN¥4.5m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 49% stake in the company, and hence can't easily be ignored. 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

Our data indicates that Private Companies hold 41%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Jiangsu Lianfa TextileLtd (including 2 which make us uncomfortable) .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.