Anhui Truchum Advanced Materials and Technology Co., Ltd.'s (SZSE:002171) market cap dropped CN¥479m last week; Individual investors bore the brunt

Key Insights

• The considerable ownership by individual investors in Anhui Truchum Advanced Materials and Technology indicates that they collectively have a greater say in management and business strategy
• The top 12 shareholders own 50% of the company
• 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 Anhui Truchum Advanced Materials and Technology Co., Ltd. (SZSE:002171), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥8.1b last week, individual investors would have faced the highest losses than any other shareholder groups of the company.

Let's take a closer look to see what the different types of shareholders can tell us about Anhui Truchum Advanced Materials and Technology.

Check out our latest analysis for Anhui Truchum Advanced Materials and Technology

What Does The Institutional Ownership Tell Us About Anhui Truchum Advanced Materials and Technology?

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.

Anhui Truchum Advanced Materials and Technology already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Anhui Truchum Advanced Materials and Technology'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 Anhui Truchum Advanced Materials and Technology. The company's largest shareholder is Anhui TRUCHUM Investment Group Co., Ltd., with ownership of 30%. For context, the second largest shareholder holds about 5.1% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.

After doing some more digging, we found that the top 12 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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 Anhui Truchum Advanced Materials and Technology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Shareholders would probably be interested to learn that insiders own shares in Anhui Truchum Advanced Materials and Technology Co., Ltd.. The insiders have a meaningful stake worth CN¥669m. Most would see this as a real positive. 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-- including retail investors -- own 46% 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 Equity Ownership

With a stake of 5.1%, private equity firms could influence the Anhui Truchum Advanced Materials and Technology board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 30%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Anhui Truchum Advanced Materials and Technology has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com