Shenzhen WOTE Advanced Materials Co.,Ltd's (SZSE:002886) market cap dropped CN¥462m last week; Individual investors bore the brunt

Key Insights

• The considerable ownership by individual investors in Shenzhen WOTE Advanced MaterialsLtd indicates that they collectively have a greater say in management and business strategy
• 50% of the business is held by the top 13 shareholders
• 29% of Shenzhen WOTE Advanced MaterialsLtd is held by insiders

Every investor in Shenzhen WOTE Advanced Materials Co.,Ltd (SZSE:002886) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 49% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While the holdings of individual investors took a hit after last week’s 10% price drop, insiders with their 29% also suffered.

Let's take a closer look to see what the different types of shareholders can tell us about Shenzhen WOTE Advanced MaterialsLtd.

See our latest analysis for Shenzhen WOTE Advanced MaterialsLtd

What Does The Institutional Ownership Tell Us About Shenzhen WOTE Advanced MaterialsLtd?

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.

We can see that Shenzhen WOTE Advanced MaterialsLtd does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Shenzhen WOTE Advanced MaterialsLtd'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 Shenzhen WOTE Advanced MaterialsLtd. The company's largest shareholder is Shenzhen Yinqiao Investment Co., Ltd., with ownership of 14%. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 13% by the third-largest shareholder.

After doing some more digging, we found that the top 13 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Shenzhen WOTE Advanced MaterialsLtd

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Shenzhen WOTE Advanced Materials Co.,Ltd. Insiders own CN¥1.1b worth of shares in the CN¥4.0b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 49% 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

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:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Shenzhen WOTE Advanced MaterialsLtd (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.