Public companies invested in Huabao Flavours & Fragrances Co., Ltd. (SZSE:300741) copped the brunt of last week's CN¥388m market cap decline

Key Insights

• Significant control over Huabao Flavours & Fragrances by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is Huabao International Holdings Limited with a 81% stake
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Huabao Flavours & Fragrances Co., Ltd. (SZSE:300741) can tell us which group is most powerful. With 81% stake, public companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, public companies as a group endured the highest losses last week after market cap fell by CN¥388m.

Let's delve deeper into each type of owner of Huabao Flavours & Fragrances, beginning with the chart below.

View our latest analysis for Huabao Flavours & Fragrances

What Does The Institutional Ownership Tell Us About Huabao Flavours & Fragrances?

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.

As you can see, institutional investors have a fair amount of stake in Huabao Flavours & Fragrances. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Huabao Flavours & Fragrances' historic earnings and revenue below, but keep in mind there's always more to the story.

Huabao Flavours & Fragrances is not owned by hedge funds. Huabao International Holdings Limited is currently the largest shareholder, with 81% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 3.4% and 0.2%, of the shares outstanding, respectively.

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 Huabao Flavours & Fragrances

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. 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 less than 1% of Huabao Flavours & Fragrances Co., Ltd.. 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¥54k worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 13% 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.

Public Company Ownership

We can see that public companies hold 81% of the Huabao Flavours & Fragrances shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Huabao Flavours & Fragrances better, we need to consider many other factors. Take risks for example - Huabao Flavours & Fragrances has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com