Shanghai DZH Limited's (SHSE:601519) last week's 7.6% decline must have disappointed individual investors who have a significant stake

Key Insights

• Significant control over Shanghai DZH by individual investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 3 shareholders
• Insider ownership in Shanghai DZH is 40%

If you want to know who really controls Shanghai DZH Limited (SHSE:601519), then you'll have to look at the makeup of its share registry. We can see that individual investors own the lion's share in the company with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 7.6% decrease in the stock price last week, individual investors suffered the most losses, but insiders who own 40% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Shanghai DZH.

See our latest analysis for Shanghai DZH

What Does The Institutional Ownership Tell Us About Shanghai DZH?

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 Shanghai DZH, 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 Shanghai DZH. Looking at our data, we can see that the largest shareholder is Changhong Zhang with 33% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 4.2% by the third-largest shareholder. Furthermore, CEO Zhi Hong Zhang is the owner of 2.6% of the company's shares.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.

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 Shanghai DZH

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.

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 most recent data indicates that insiders own a reasonable proportion of Shanghai DZH Limited. It has a market capitalization of just CN¥17b, and insiders have CN¥6.9b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 45% 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.

Public Company Ownership

Public companies currently own 13% of Shanghai DZH stock. 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:

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. For example, we've discovered 2 warning signs for Shanghai DZH (1 is a bit concerning!) that you should be aware of before investing here.

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.

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.