Retail investors invested in Kingfa Sci. & Tech. Co., Ltd. (SHSE:600143) copped the brunt of last week's CN¥908m market cap decline

Key Insights

• The considerable ownership by retail investors in Kingfa Sci. & Tech indicates that they collectively have a greater say in management and business strategy
• A total of 25 investors have a majority stake in the company with 40% ownership
• 32% of Kingfa Sci. & Tech is held by insiders

To get a sense of who is truly in control of Kingfa Sci. & Tech. Co., Ltd. (SHSE:600143), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 4.9% decrease in the stock price last week, retail investors suffered the most losses, but insiders who own 32% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Kingfa Sci. & Tech.

View our latest analysis for Kingfa Sci. & Tech

What Does The Institutional Ownership Tell Us About Kingfa Sci. & Tech?

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 Kingfa Sci. & Tech. 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. 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 Kingfa Sci. & Tech's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Kingfa Sci. & Tech. Zhimin Yuan is currently the company's largest shareholder with 19% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.6% and 3.5% of the stock. Nan Jing Li, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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

Insider Ownership Of Kingfa Sci. & Tech

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Kingfa Sci. & Tech. Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥5.9b stake in this CN¥18b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 59% of Kingfa Sci. & Tech. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

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. Case in point: We've spotted 4 warning signs for Kingfa Sci. & Tech you should be aware of, and 2 of them are a bit unpleasant.

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.

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