Private companies invested in Shanxi Lanhua Sci-Tech Venture Co.,Ltd (SHSE:600123) copped the brunt of last week's CN¥368m market cap decline

Key Insights

• Shanxi Lanhua Sci-Tech VentureLtd's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 4 investors have a majority stake in the company with 51% ownership
• Institutional ownership in Shanxi Lanhua Sci-Tech VentureLtd is 13%

To get a sense of who is truly in control of Shanxi Lanhua Sci-Tech Venture Co.,Ltd (SHSE:600123), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥368m.

Let's delve deeper into each type of owner of Shanxi Lanhua Sci-Tech VentureLtd, beginning with the chart below.

View our latest analysis for Shanxi Lanhua Sci-Tech VentureLtd

What Does The Institutional Ownership Tell Us About Shanxi Lanhua Sci-Tech VentureLtd?

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.

As you can see, institutional investors have a fair amount of stake in Shanxi Lanhua Sci-Tech VentureLtd. 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. 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 Shanxi Lanhua Sci-Tech VentureLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Shanxi Lanhua Sci-Tech VentureLtd. Shanxi Lanhua Coal Industry Group Co., Ltd. is currently the company's largest shareholder with 45% of shares outstanding. For context, the second largest shareholder holds about 2.9% of the shares outstanding, followed by an ownership of 1.3% by the third-largest shareholder.

On looking further, we found that 51% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Shanxi Lanhua Sci-Tech VentureLtd

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.

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 data suggests that insiders own under 1% of Shanxi Lanhua Sci-Tech Venture 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's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥611k worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanxi Lanhua Sci-Tech VentureLtd. 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.

Private Company Ownership

We can see that Private Companies own 46%, of the shares on issue. 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.

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. Take risks for example - Shanxi Lanhua Sci-Tech VentureLtd has 2 warning signs (and 1 which is significant) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.