Shaanxi Xinghua Chemistry Co.,Ltd's (SZSE:002109) market cap surged CN¥383m last week, private companies who have a lot riding on the company were rewarded

Key Insights

• Significant control over Shaanxi Xinghua ChemistryLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• 57% of the business is held by the top 2 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Shaanxi Xinghua Chemistry Co.,Ltd (SZSE:002109), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 58% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private companies benefitted the most after the company's market cap rose by CN¥383m last week.

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

See our latest analysis for Shaanxi Xinghua ChemistryLtd

What Does The Institutional Ownership Tell Us About Shaanxi Xinghua ChemistryLtd?

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.

As you can see, institutional investors have a fair amount of stake in Shaanxi Xinghua ChemistryLtd. 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 Shaanxi Xinghua ChemistryLtd, (below). Of course, keep in mind that there are other factors to consider, too.

Shaanxi Xinghua ChemistryLtd is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Shaanxi Yanchang Petroleum (Group) Co., Ltd with 40% of shares outstanding. Shaanxi Xinghua Group Company Ltd is the second largest shareholder owning 17% of common stock, and Nuode Asset Management Co., Ltd. holds about 2.4% of the company stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence 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. 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 Shaanxi Xinghua ChemistryLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 information suggests that Shaanxi Xinghua Chemistry Co.,Ltd insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It has a market capitalization of just CN¥4.6b, and the board has only CN¥8.6m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 35% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

Our data indicates that Private Companies hold 58%, 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:

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Shaanxi Xinghua ChemistryLtd (of which 2 are concerning!) you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.