Shanxi Coking Co., Ltd.'s (SHSE:600740) market cap dropped CN¥359m last week; Private companies bore the brunt

Key Insights

• The considerable ownership by private companies in Shanxi Coking indicates that they collectively have a greater say in management and business strategy
• The largest shareholder of the company is Shanxi Jiao Hua Group Co., Ltd. with a 51% stake
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Shanxi Coking Co., Ltd. (SHSE:600740) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private companies 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 market cap fell to CN¥9.0b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Shanxi Coking.

Check out our latest analysis for Shanxi Coking

What Does The Institutional Ownership Tell Us About Shanxi Coking?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Shanxi Coking. 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 Shanxi Coking's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Shanxi Coking. Shanxi Jiao Hua Group Co., Ltd. is currently the company's largest shareholder with 51% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 3.3% by the third-largest shareholder.

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 Shanxi Coking

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.

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 Shanxi Coking 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¥252k 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-- including retail investors -- own 37% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 57%, of the Shanxi Coking 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Shanxi Coking better, we need to consider many other factors. Take risks for example - Shanxi Coking has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.