Following recent decline, Shifeng Cultural Development Co., Ltd.'s (SZSE:002862) top shareholder CEO Jun Quan Cai sees holdings value drop by 22%

Key Insights

• Significant insider control over Shifeng Cultural Development implies vested interests in company growth
• 53% of the business is held by the top 4 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shifeng Cultural Development Co., Ltd. (SZSE:002862), it is important to understand the ownership structure of the business. With 50% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 22% decline in share price, insiders suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Shifeng Cultural Development.

View our latest analysis for Shifeng Cultural Development

What Does The Institutional Ownership Tell Us About Shifeng Cultural Development?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Shifeng Cultural Development 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Shifeng Cultural Development's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Shifeng Cultural Development. The company's CEO Jun Quan Cai is the largest shareholder with 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.6% and 5.0% of the stock.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 Shifeng Cultural Development

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

It seems insiders own a significant proportion of Shifeng Cultural Development Co., Ltd.. It has a market capitalization of just CN¥3.5b, and insiders have CN¥1.7b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 44% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

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. Be aware that Shifeng Cultural Development is showing 2 warning signs in our investment analysis , you should know about...

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

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

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.