Guangdong Guanghua Sci-Tech Co., Ltd. (SZSE:002741) surges 8.0%; retail investors who own 45% shares profited along with insiders

Key Insights

• The considerable ownership by retail investors in Guangdong Guanghua Sci-Tech indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 6 shareholders
• Insiders own 44% of Guangdong Guanghua Sci-Tech

If you want to know who really controls Guangdong Guanghua Sci-Tech Co., Ltd. (SZSE:002741), then you'll have to look at the makeup of its share registry. We can see that retail investors own the lion's share in the company with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Retail investors gained the most after market cap touched CN¥4.9b last week, while insiders who own 44% also benefitted.

Let's take a closer look to see what the different types of shareholders can tell us about Guangdong Guanghua Sci-Tech.

Check out our latest analysis for Guangdong Guanghua Sci-Tech

What Does The Institutional Ownership Tell Us About Guangdong Guanghua Sci-Tech?

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.

As you can see, institutional investors have a fair amount of stake in Guangdong Guanghua Sci-Tech. 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 Guangdong Guanghua Sci-Tech's historic earnings and revenue below, but keep in mind there's always more to the story.

Guangdong Guanghua Sci-Tech is not owned by hedge funds. The company's largest shareholder is Chuang Fa Zheng, with ownership of 26%. The second and third largest shareholders are Ren Zheng and Han Zhao Chen, with an equal amount of shares to their name at 6.2%. Interestingly, the bottom two of the top three shareholders also hold the title of Chief Executive Officer and Chairman of the Board, respectively, suggesting that these insiders have a personal stake in the company.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Guangdong Guanghua Sci-Tech

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.

Our most recent data indicates that insiders own a reasonable proportion of Guangdong Guanghua Sci-Tech Co., Ltd.. It has a market capitalization of just CN¥4.9b, and insiders have CN¥2.2b worth of shares in their own names. 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

The general public-- including retail investors -- own 45% 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 4.3%, 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. To that end, you should learn about the 2 warning signs we've spotted with Guangdong Guanghua Sci-Tech (including 1 which is a bit unpleasant) .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.