C.Q. Pharmaceutical Holding Co., Ltd.'s (SZSE:000950) market cap surged CN¥363m last week, private companies who have a lot riding on the company were rewarded

Key Insights

• Significant control over C.Q. Pharmaceutical Holding by private companies implies that the general public has more power to influence management and governance-related decisions
• 55% of the business is held by the top 2 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls C.Q. Pharmaceutical Holding Co., Ltd. (SZSE:000950), then you'll have to look at the makeup of its share registry. We can see that private companies own the lion's share in the company with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private companies were the biggest beneficiaries of last week’s 4.5% gain.

In the chart below, we zoom in on the different ownership groups of C.Q. Pharmaceutical Holding.

View our latest analysis for C.Q. Pharmaceutical Holding

What Does The Institutional Ownership Tell Us About C.Q. Pharmaceutical Holding?

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.

C.Q. Pharmaceutical Holding already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 C.Q. Pharmaceutical Holding, (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 C.Q. Pharmaceutical Holding. The company's largest shareholder is Chongqing Pharmaceutical Health Industry Co., Ltd., with ownership of 38%. In comparison, the second and third largest shareholders hold about 16% and 3.2% of the stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. 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 C.Q. Pharmaceutical Holding

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 C.Q. Pharmaceutical Holding Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥5.2m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over C.Q. Pharmaceutical Holding. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 57%, 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.

Public Company Ownership

We can see that public companies hold 3.9% of the C.Q. Pharmaceutical Holding shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand C.Q. Pharmaceutical Holding better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for C.Q. Pharmaceutical Holding (of which 1 is concerning!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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