Painful week for private companies invested in Hangzhou Huawang New Material Technology Co.,Ltd. (SHSE:605377) after 6.7% drop, institutions also suffered losses

Key Insights

• Significant control over Hangzhou Huawang New Material TechnologyLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 4 shareholders own 51% of the company
• Insider ownership in Hangzhou Huawang New Material TechnologyLtd is 23%

Every investor in Hangzhou Huawang New Material Technology Co.,Ltd. (SHSE:605377) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 27% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 27% came under pressure after market cap dropped to CN¥7.2b last week,private companies took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Hangzhou Huawang New Material TechnologyLtd.

View our latest analysis for Hangzhou Huawang New Material TechnologyLtd

What Does The Institutional Ownership Tell Us About Hangzhou Huawang New Material TechnologyLtd?

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 Hangzhou Huawang New Material TechnologyLtd. 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 Hangzhou Huawang New Material TechnologyLtd'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 Hangzhou Huawang New Material TechnologyLtd. Looking at our data, we can see that the largest shareholder is Hangzhou Huawang Industry Group Co., Ltd. with 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 18% and 3.9%, of the shares outstanding, respectively. In addition, we found that Yancheng Zhang, the CEO has 1.4% of the shares allocated to their name.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Hangzhou Huawang New Material TechnologyLtd

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Hangzhou Huawang New Material Technology Co.,Ltd.. It has a market capitalization of just CN¥7.2b, and insiders have CN¥1.7b worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 24% 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

Our data indicates that Private Companies hold 27%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Hangzhou Huawang New Material TechnologyLtd (1 is significant) that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.