Private equity firms are Daoming Optics&Chemical Co.,Ltd's (SZSE:002632) biggest owners and were rewarded after market cap rose by CN¥381m last week

Key Insights

• The considerable ownership by private equity firms in Daoming Optics&ChemicalLtd indicates that they collectively have a greater say in management and business strategy
• A total of 2 investors have a majority stake in the company with 51% ownership
• 21% of Daoming Optics&ChemicalLtd is held by insiders

Every investor in Daoming Optics&Chemical Co.,Ltd (SZSE:002632) should be aware of the most powerful shareholder groups. We can see that private equity firms own the lion's share in the company with 40% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private equity firms collectively scored the highest last week as the company hit CN¥5.5b market cap following a 7.5% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Daoming Optics&ChemicalLtd.

Check out our latest analysis for Daoming Optics&ChemicalLtd

What Does The Institutional Ownership Tell Us About Daoming Optics&ChemicalLtd?

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.

Institutions have a very small stake in Daoming Optics&ChemicalLtd. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Daoming Optics&ChemicalLtd. Zhejiang Daoming Investment Co., Ltd. is currently the largest shareholder, with 40% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 6.7% of the stock. Two of the top three shareholders happen to be Chief Executive Officer and Vice Chairman, respectively. That is, insiders feature higher up in the heirarchy of the company's top shareholders.

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 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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Daoming Optics&ChemicalLtd

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.

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 most recent data indicates that insiders own a reasonable proportion of Daoming Optics&Chemical Co.,Ltd. Insiders own CN¥1.2b worth of shares in the CN¥5.5b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Daoming Optics&ChemicalLtd. 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 Equity Ownership

With a stake of 40%, private equity firms could influence the Daoming Optics&ChemicalLtd board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Daoming Optics&ChemicalLtd that you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.