Individual investors invested in Chengxin Lithium Group Co., Ltd. (SZSE:002240) copped the brunt of last week's CN¥829m market cap decline

Key Insights

• Significant control over Chengxin Lithium Group by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 44% ownership
• Institutional ownership in Chengxin Lithium Group is 11%

To get a sense of who is truly in control of Chengxin Lithium Group Co., Ltd. (SZSE:002240), 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 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥14b last week, individual investors would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Chengxin Lithium Group.

View our latest analysis for Chengxin Lithium Group

What Does The Institutional Ownership Tell Us About Chengxin Lithium Group?

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 Chengxin Lithium Group. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Chengxin Lithium Group's earnings history below. Of course, the future is what really matters.

Chengxin Lithium Group is not owned by hedge funds. Our data shows that Shenzhen Chengtun Industrial Development Co., Ltd. is the largest shareholder with 18% of shares outstanding. For context, the second largest shareholder holds about 5.2% of the shares outstanding, followed by an ownership of 3.0% by the third-largest shareholder.

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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Chengxin Lithium Group

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can report that insiders do own shares in Chengxin Lithium Group Co., Ltd.. The insiders have a meaningful stake worth CN¥677m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 55% of Chengxin Lithium Group. 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

We can see that Private Companies own 24%, of the shares on issue. 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

We can see that public companies hold 5.2% of the Chengxin Lithium Group shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. For instance, we've identified 2 warning signs for Chengxin Lithium Group (1 is potentially serious) that you should be aware of.

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.