Dirui Industrial Co.,Ltd.'s (SZSE:300396) biggest owners are private equity firms who got richer after stock soared 9.1% last week

Key Insights

• The considerable ownership by private equity firms in Dirui IndustrialLtd indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 4 shareholders
• Insider ownership in Dirui IndustrialLtd is 14%

To get a sense of who is truly in control of Dirui Industrial Co.,Ltd. (SZSE:300396), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private equity firms with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private equity firms benefitted the most after the company's market cap rose by CN¥398m last week.

Let's delve deeper into each type of owner of Dirui IndustrialLtd, beginning with the chart below.

Check out our latest analysis for Dirui IndustrialLtd

What Does The Institutional Ownership Tell Us About Dirui IndustrialLtd?

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.

We can see that Dirui IndustrialLtd does have institutional investors; and they hold a good portion of the company's stock. 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 Dirui IndustrialLtd's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Dirui IndustrialLtd. China Resources Capital Management Limited is currently the company's largest shareholder with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 6.4%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Dirui IndustrialLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Dirui Industrial Co.,Ltd.. Insiders own CN¥678m worth of shares in the CN¥4.8b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Dirui IndustrialLtd. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 41% stake in Dirui IndustrialLtd. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Dirui IndustrialLtd (1 is a bit unpleasant) that you should be aware of.

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.

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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.