Insiders with their considerable ownership were the key benefactors as Sokan New Materials Group Co., Ltd. (SHSE:688157) touches CN¥4.0b market cap

Key Insights

• Significant insider control over Sokan New Materials Group implies vested interests in company growth
• 56% of the business is held by the top 2 shareholders
• Institutional ownership in Sokan New Materials Group is 15%

A look at the shareholders of Sokan New Materials Group Co., Ltd. (SHSE:688157) can tell us which group is most powerful. With 56% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders were the biggest beneficiaries of last week’s 10% gain.

In the chart below, we zoom in on the different ownership groups of Sokan New Materials Group.

Check out our latest analysis for Sokan New Materials Group

What Does The Institutional Ownership Tell Us About Sokan New Materials Group?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Sokan New Materials Group does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Sokan New Materials Group'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 Sokan New Materials Group. Looking at our data, we can see that the largest shareholder is Yunjian Lin with 48% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.8% and 2.5% of the stock. Additionally, the company's CEO Weiguo Wang directly holds 0.9% of the total shares outstanding.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Sokan New Materials Group

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems that insiders own more than half the Sokan New Materials Group Co., Ltd. stock. This gives them a lot of power. Given it has a market cap of CN¥4.0b, that means they have CN¥2.3b worth of shares. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 22% stake in the company, and hence can't easily be ignored. 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 Company Ownership

Our data indicates that Private Companies hold 7.8%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Sokan New Materials Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Sokan New Materials Group you should be aware of, and 1 of them is significant.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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