DeHua TB New Decoration Material Co.,Ltd's (SZSE:002043) stock price dropped 4.7% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in DeHua TB New Decoration MaterialLtd indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 4 shareholders
• Institutions own 13% of DeHua TB New Decoration MaterialLtd

A look at the shareholders of DeHua TB New Decoration Material Co.,Ltd (SZSE:002043) can tell us which group is most powerful. With 37% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 4.7% decline in share price, private companies suffered the most losses.

In the chart below, we zoom in on the different ownership groups of DeHua TB New Decoration MaterialLtd.

See our latest analysis for DeHua TB New Decoration MaterialLtd

What Does The Institutional Ownership Tell Us About DeHua TB New Decoration MaterialLtd?

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.

As you can see, institutional investors have a fair amount of stake in DeHua TB New Decoration MaterialLtd. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 DeHua TB New Decoration MaterialLtd'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 DeHua TB New Decoration MaterialLtd. Dehua Group Holding Co., Ltd. is currently the company's largest shareholder with 37% of shares outstanding. With 6.2% and 4.1% of the shares outstanding respectively, Dehua Venture Capital Co., Ltd. and Yong Qi are the second and third largest shareholders. Furthermore, CEO Lihua Lu is the owner of 0.7% of the company's shares.

On looking further, we found that 51% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 DeHua TB New Decoration MaterialLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in DeHua TB New Decoration Material Co.,Ltd. This is a big company, so it is good to see this level of alignment. Insiders own CN¥610m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 35% stake in DeHua TB New Decoration MaterialLtd. 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 Equity Ownership

With a stake of 6.2%, private equity firms could influence the DeHua TB New Decoration MaterialLtd board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 37%, of the DeHua TB New Decoration MaterialLtd stock. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand DeHua TB New Decoration MaterialLtd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for DeHua TB New Decoration MaterialLtd you should know about.

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.