Huadong Medicine Co., Ltd's (SZSE:000963) largest shareholders are private companies who were rewarded as market cap surged CN¥2.7b last week

Key Insights

• The considerable ownership by private companies in Huadong Medicine indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 58% of the company
• 12% of Huadong Medicine is held by Institutions

If you want to know who really controls Huadong Medicine Co., Ltd (SZSE:000963), then you'll have to look at the makeup of its share registry. With 58% stake, private companies 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).

Clearly, private companies benefitted the most after the company's market cap rose by CN¥2.7b last week.

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

Check out our latest analysis for Huadong Medicine

What Does The Institutional Ownership Tell Us About Huadong Medicine?

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.

Huadong Medicine 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Huadong Medicine's historic earnings and revenue below, but keep in mind there's always more to the story.

Huadong Medicine is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is China Grand Enterprises, Inc. with 42% of shares outstanding. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 1.3% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 58% stake.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Huadong Medicine

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 cannot confirm that board members are holding shares personally. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO.

General Public Ownership

The general public, who are usually individual investors, hold a 30% stake in Huadong Medicine. 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

It seems that Private Companies own 58%, of the Huadong Medicine stock. 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. Case in point: We've spotted 1 warning sign for Huadong Medicine you should be aware of.

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.

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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.