Xinjiang Zhongtai Chemical Co., Ltd.'s (SZSE:002092) stock price dropped 20% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in Xinjiang Zhongtai Chemical indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 44% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Xinjiang Zhongtai Chemical Co., Ltd. (SZSE:002092) should be aware of the most powerful shareholder groups. We can see that retail investors own the lion's share in the company with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, retail investors endured the biggest losses as the stock fell by 20%.

Let's delve deeper into each type of owner of Xinjiang Zhongtai Chemical, beginning with the chart below.

Check out our latest analysis for Xinjiang Zhongtai Chemical

What Does The Institutional Ownership Tell Us About Xinjiang Zhongtai Chemical?

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.

Xinjiang Zhongtai Chemical already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Xinjiang Zhongtai Chemical's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Xinjiang Zhongtai Chemical. Xinjiang Zhongtai(Group) Co.,Ltd. is currently the company's largest shareholder with 29% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.6% and 3.0% of the stock.

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.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Xinjiang Zhongtai Chemical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 suggests that insiders own under 1% of Xinjiang Zhongtai Chemical Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥4.7m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 55% stake in Xinjiang Zhongtai Chemical, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

It seems that Private Companies own 36%, of the Xinjiang Zhongtai Chemical stock. 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.

Public Company Ownership

It appears to us that public companies own 3.0% of Xinjiang Zhongtai Chemical. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. To that end, you should be aware of the 1 warning sign we've spotted with Xinjiang Zhongtai Chemical .

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.