Shandong Haihua Co.,Ltd's (SZSE:000822) last week's 6.2% decline must have disappointed individual investors who have a significant stake

Key Insights

• Significant control over Shandong HaihuaLtd by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 47% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shandong Haihua Co.,Ltd (SZSE:000822), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 53% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, individual investors endured the biggest losses as the stock fell by 6.2%.

In the chart below, we zoom in on the different ownership groups of Shandong HaihuaLtd.

View our latest analysis for Shandong HaihuaLtd

What Does The Institutional Ownership Tell Us About Shandong HaihuaLtd?

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 Shandong HaihuaLtd does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Shandong HaihuaLtd, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Shandong HaihuaLtd. Shandong Haihua Group Co., Ltd is currently the company's largest shareholder with 40% of shares outstanding. With 2.9% and 1.0% of the shares outstanding respectively, Zheshang Fund Management Co., Ltd. and Hongdao Investment Management Co., Ltd. are the second and third largest shareholders.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 Shandong HaihuaLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 data cannot confirm that board members are holding shares personally. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO.

General Public Ownership

The general public -- including retail investors -- own 53% of Shandong HaihuaLtd. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 40%, of the company's shares. 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. Take risks for example - Shandong HaihuaLtd has 2 warning signs (and 1 which is significant) we think you should know about.

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.