Hangzhou Greenda Electronic Materials Co., Ltd.'s (SHSE:603931) stock price dropped 9.2% last week; private companies would not be happy

Key Insights

• Hangzhou Greenda Electronic Materials' significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 2 investors have a majority stake in the company with 63% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Hangzhou Greenda Electronic Materials Co., Ltd. (SHSE:603931), it is important to understand the ownership structure of the business. With 51% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private companies endured the biggest losses as the stock fell by 9.2%.

Let's take a closer look to see what the different types of shareholders can tell us about Hangzhou Greenda Electronic Materials.

Check out our latest analysis for Hangzhou Greenda Electronic Materials

What Does The Institutional Ownership Tell Us About Hangzhou Greenda Electronic 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.

We can see that Hangzhou Greenda Electronic Materials 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 Hangzhou Greenda Electronic Materials' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Hangzhou Greenda Electronic Materials. The company's largest shareholder is Hangzhou Electrochemical Group Co., Ltd., with ownership of 42%. With 21% and 5.9% of the shares outstanding respectively, Ningbo Qingcheng Investment Management Partnership Enterprise (LP) and Invesco Great Wall Fund Management Co. Ltd are the second and third largest shareholders.

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 63% stake.

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. 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 Hangzhou Greenda Electronic Materials

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Hangzhou Greenda Electronic Materials Co., Ltd. insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about CN¥14m worth of stock. This compares to a market capitalization of CN¥3.8b. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Hangzhou Greenda Electronic Materials. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 21%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 51%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hangzhou Greenda Electronic Materials , and understanding them should be part of your investment process.

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.

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