Jiangsu Lanfeng Bio-chemical Co.,Ltd's (SZSE:002513) last week's 14% decline must have disappointed retail investors who have a significant stake

Key Insights

• The considerable ownership by retail investors in Jiangsu Lanfeng Bio-chemicalLtd indicates that they collectively have a greater say in management and business strategy
• A total of 17 investors have a majority stake in the company with 50% ownership
• 20% of Jiangsu Lanfeng Bio-chemicalLtd is held by insiders

To get a sense of who is truly in control of Jiangsu Lanfeng Bio-chemical Co.,Ltd (SZSE:002513), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 50% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of retail investors took a hit after last week’s 14% price drop, insiders with their 20% also suffered.

In the chart below, we zoom in on the different ownership groups of Jiangsu Lanfeng Bio-chemicalLtd.

See our latest analysis for Jiangsu Lanfeng Bio-chemicalLtd

What Does The Institutional Ownership Tell Us About Jiangsu Lanfeng Bio-chemicalLtd?

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.

Jiangsu Lanfeng Bio-chemicalLtd 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. 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 Jiangsu Lanfeng Bio-chemicalLtd, (below). Of course, keep in mind that there are other factors to consider, too.

Jiangsu Lanfeng Bio-chemicalLtd is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Xu Zheng with 18% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.0% and 7.6%, of the shares outstanding, respectively.

A deeper look at our ownership data shows that the top 17 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. 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 Jiangsu Lanfeng Bio-chemicalLtd

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems insiders own a significant proportion of Jiangsu Lanfeng Bio-chemical Co.,Ltd. Insiders own CN¥352m worth of shares in the CN¥1.8b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 50% of Jiangsu Lanfeng Bio-chemicalLtd shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

We can see that Private Companies own 15%, of the shares on issue. 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. Be aware that Jiangsu Lanfeng Bio-chemicalLtd is showing 1 warning sign in our investment analysis , 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.