Jiangsu Hengxing New Material Technology Co.,Ltd.'s (SHSE:603276) last week's 10% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Jiangsu Hengxing New Material TechnologyLtd indicates that they collectively have a greater say in management and business strategy
• 54% of the business is held by the top 2 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Jiangsu Hengxing New Material Technology Co.,Ltd. (SHSE:603276) can tell us which group is most powerful. The group holding the most number of shares in the company, around 59% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 10% decline in share price, private companies suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Jiangsu Hengxing New Material TechnologyLtd.

View our latest analysis for Jiangsu Hengxing New Material TechnologyLtd

What Does The Institutional Ownership Tell Us About Jiangsu Hengxing New Material TechnologyLtd?

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.

Institutions have a very small stake in Jiangsu Hengxing New Material TechnologyLtd. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Jiangsu Hengxing New Material TechnologyLtd is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Yixing Zhonggang Investment Co., Ltd. with 47% of shares outstanding. Yixing Gangxing Enterprise Management Co., Ltd. is the second largest shareholder owning 6.3% of common stock, and GP Capital Co., Ltd. holds about 5.8% of the company stock. Additionally, the company's CEO Hengxiu Wang directly holds 1.9% of the total shares outstanding.

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 54% 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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Jiangsu Hengxing New Material TechnologyLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in Jiangsu Hengxing New Material Technology Co.,Ltd.. In their own names, insiders own CN¥177m worth of stock in the CN¥2.8b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 5.8%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 59%, of the Jiangsu Hengxing New Material TechnologyLtd stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Jiangsu Hengxing New Material TechnologyLtd (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.