Shandong Kaisheng New Materials Co.,Ltd.'s (SZSE:301069) last week's 6.9% decline must have disappointed public companies who have a significant stake

Key Insights

• The considerable ownership by public companies in Shandong Kaisheng New MaterialsLtd indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 52% of the company
• Institutional ownership in Shandong Kaisheng New MaterialsLtd is 12%

To get a sense of who is truly in control of Shandong Kaisheng New Materials Co.,Ltd. (SZSE:301069), it is important to understand the ownership structure of the business. We can see that public companies own the lion's share in the company with 45% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CN¥5.2b last week, public companies would have faced the highest losses than any other shareholder groups of the company.

Let's take a closer look to see what the different types of shareholders can tell us about Shandong Kaisheng New MaterialsLtd.

Check out our latest analysis for Shandong Kaisheng New MaterialsLtd

What Does The Institutional Ownership Tell Us About Shandong Kaisheng New 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.

As you can see, institutional investors have a fair amount of stake in Shandong Kaisheng New MaterialsLtd. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Shandong Kaisheng New MaterialsLtd, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Shandong Kaisheng New MaterialsLtd. Huapont Life Sciences Co.,Ltd is currently the company's largest shareholder with 45% of shares outstanding. With 7.5% and 6.8% of the shares outstanding respectively, Jiarong Wang and Zibo Kaisheng Investment Center (Limited Partnership) are the second and third largest shareholders.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Shandong Kaisheng New MaterialsLtd

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Shandong Kaisheng New Materials Co.,Ltd.. As individuals, the insiders collectively own CN¥473m worth of the CN¥5.2b company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 27% stake in Shandong Kaisheng New MaterialsLtd. 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 Equity Ownership

With an ownership of 6.8%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

It appears to us that public companies own 45% of Shandong Kaisheng New MaterialsLtd. 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:

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 3 warning signs with Shandong Kaisheng New MaterialsLtd , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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