The recent CN¥232m market cap decrease is likely to have disappointed insiders invested in Hubei Xiangyuan New Material Technology Inc. (SZSE:300980)

Key Insights

• Hubei Xiangyuan New Material Technology's significant insider ownership suggests inherent interests in company's expansion
• 51% of the business is held by the top 2 shareholders
• Institutions own 16% of Hubei Xiangyuan New Material Technology

If you want to know who really controls Hubei Xiangyuan New Material Technology Inc. (SZSE:300980), then you'll have to look at the makeup of its share registry. We can see that individual insiders own the lion's share in the company with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 12%.

Let's take a closer look to see what the different types of shareholders can tell us about Hubei Xiangyuan New Material Technology.

See our latest analysis for Hubei Xiangyuan New Material Technology

What Does The Institutional Ownership Tell Us About Hubei Xiangyuan New Material Technology?

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.

We can see that Hubei Xiangyuan New Material Technology 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 Hubei Xiangyuan New Material Technology'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 Hubei Xiangyuan New Material Technology. Zhixiang Wei is currently the largest shareholder, with 30% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 20% and 4.1%, of the shares outstanding, respectively. Qiong Wei, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Hubei Xiangyuan New Material Technology

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

It seems that insiders own more than half the Hubei Xiangyuan New Material Technology Inc. stock. This gives them a lot of power. Given it has a market cap of CN¥1.7b, that means they have CN¥877m worth of shares. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hubei Xiangyuan New Material Technology. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 3.7%, of the Hubei Xiangyuan New Material Technology stock. 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:

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 Hubei Xiangyuan New Material Technology that you should be aware of.

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.