Retail investors are Guangzhou Lushan New Materials Co., Ltd.'s (SHSE:603051) biggest owners and were hit after market cap dropped CN¥304m

Key Insights

• The considerable ownership by retail investors in Guangzhou Lushan New Materials indicates that they collectively have a greater say in management and business strategy
• A total of 11 investors have a majority stake in the company with 50% ownership
• Insider ownership in Guangzhou Lushan New Materials is 43%

A look at the shareholders of Guangzhou Lushan New Materials Co., Ltd. (SHSE:603051) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are retail investors with 48% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders, who own 43% shares weren’t spared from last week’s CN¥304m market cap drop, retail investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Guangzhou Lushan New Materials.

See our latest analysis for Guangzhou Lushan New Materials

What Does The Institutional Ownership Tell Us About Guangzhou Lushan New Materials?

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 Guangzhou Lushan New Materials. 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 Guangzhou Lushan New Materials' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Guangzhou Lushan New Materials. The company's CEO Jiasheng Wang is the largest shareholder with 33% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.3% and 2.2% of the stock. Interestingly, the second-largest shareholder, Lina Han is also Other Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Guangzhou Lushan New Materials

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.

It seems insiders own a significant proportion of Guangzhou Lushan New Materials Co., Ltd.. Insiders have a CN¥1.0b stake in this CN¥2.4b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 48% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Guangzhou Lushan New Materials. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Guangzhou Lushan New Materials is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.