Dazhong Mining Co., Ltd.'s (SZSE:001203) stock price dropped 4.7% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in Dazhong Mining indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 64% of the company
• 25% of Dazhong Mining is held by insiders

To get a sense of who is truly in control of Dazhong Mining Co., Ltd. (SZSE:001203), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 52% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 25% shares weren’t spared from last week’s CN¥639m market cap drop, private companies as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Dazhong Mining.

Check out our latest analysis for Dazhong Mining

What Does The Institutional Ownership Tell Us About Dazhong Mining?

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.

Less than 5% of Dazhong Mining is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

Hedge funds don't have many shares in Dazhong Mining. Our data shows that Zhongxing Group Co., Ltd. is the largest shareholder with 49% of shares outstanding. With 15% and 6.6% of the shares outstanding respectively, Lairong Lin and Xinyu Liang are the second and third largest shareholders.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Dazhong Mining

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Dazhong Mining Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥3.2b stake in this CN¥13b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 19% 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 52%, 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 Dazhong Mining better, we need to consider many other factors. Be aware that Dazhong Mining is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.