Guizhou Chanhen Chemical Corporation's (SZSE:002895) last week's 4.4% decline must have disappointed private companies who have a significant stake

Key Insights

• Significant control over Guizhou Chanhen Chemical by private companies implies that the general public has more power to influence management and governance-related decisions
• Sichuan Chanhen Holding Group CO., Ltd owns 52% of the company
• Institutional ownership in Guizhou Chanhen Chemical is 15%

Every investor in Guizhou Chanhen Chemical Corporation (SZSE:002895) should be aware of the most powerful shareholder groups. With 57% stake, private companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥555m.

In the chart below, we zoom in on the different ownership groups of Guizhou Chanhen Chemical.

See our latest analysis for Guizhou Chanhen Chemical

What Does The Institutional Ownership Tell Us About Guizhou Chanhen Chemical?

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.

Guizhou Chanhen Chemical 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. 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 Guizhou Chanhen Chemical's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Guizhou Chanhen Chemical. The company's largest shareholder is Sichuan Chanhen Holding Group CO., Ltd, with ownership of 52%. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 3.9% of the shares outstanding, followed by an ownership of 2.5% by the third-largest shareholder.

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. 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 Guizhou Chanhen Chemical

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 data suggests that insiders own under 1% of Guizhou Chanhen Chemical Corporation in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥47m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in Guizhou Chanhen Chemical. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 57%, 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guizhou Chanhen Chemical , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.