New Hope Liuhe Co.,Ltd.'s (SZSE:000876) market cap dropped CN¥1.5b last week; Individual investors bore the brunt

Key Insights

• Significant control over New Hope LiuheLtd by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 49% ownership
• Institutional ownership in New Hope LiuheLtd is 10%

If you want to know who really controls New Hope Liuhe Co.,Ltd. (SZSE:000876), then you'll have to look at the makeup of its share registry. With 51% stake, individual investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 3.4% decline in share price, individual investors suffered the most losses.

In the chart below, we zoom in on the different ownership groups of New Hope LiuheLtd.

Check out our latest analysis for New Hope LiuheLtd

What Does The Institutional Ownership Tell Us About New Hope LiuheLtd?

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.

New Hope LiuheLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 New Hope LiuheLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in New Hope LiuheLtd. New Hope Holdings Co., Ltd. is currently the company's largest shareholder with 34% of shares outstanding. For context, the second largest shareholder holds about 2.8% of the shares outstanding, followed by an ownership of 2.3% by the third-largest shareholder.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of New Hope LiuheLtd

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. 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 information suggests that New Hope Liuhe Co.,Ltd. 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's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥83m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 51% stake in New Hope LiuheLtd, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

We can see that Private Companies own 39%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the 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. Be aware that New Hope LiuheLtd is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.