Private companies among Guangdong Zhongnan Iron and Steel Co., Ltd.'s (SZSE:000717) largest stockholders and were hit after last week's 9.0% price drop

Key Insights

• Significant control over Guangdong Zhongnan Iron and Steel by private companies implies that the general public has more power to influence management and governance-related decisions
• China Baowu Steel Group Co.,Ltd owns 53% of the company
• 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 Guangdong Zhongnan Iron and Steel Co., Ltd. (SZSE:000717), it is important to understand the ownership structure of the business. With 53% stake, private companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥461m.

In the chart below, we zoom in on the different ownership groups of Guangdong Zhongnan Iron and Steel.

View our latest analysis for Guangdong Zhongnan Iron and Steel

What Does The Institutional Ownership Tell Us About Guangdong Zhongnan Iron and Steel?

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.

Guangdong Zhongnan Iron and Steel already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Guangdong Zhongnan Iron and Steel's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Guangdong Zhongnan Iron and Steel. Our data shows that China Baowu Steel Group Co.,Ltd is the largest shareholder with 53% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Hong Kong Exchanges & Clearing Limited, Asset Management Arm is the second largest shareholder owning 1.8% of common stock, and Wanjia Asset Management Co., Ltd. holds about 1.1% of the company stock.

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. 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 Guangdong Zhongnan Iron and Steel

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.

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 less than 1% of Guangdong Zhongnan Iron and Steel Co., Ltd.. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about CN¥17m worth of stock. This compares to a market capitalization of CN¥4.6b. 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-- including retail investors -- own 38% 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

We can see that Private Companies own 53%, of the shares on issue. 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 Guangdong Zhongnan Iron and Steel , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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

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.