Henan Liliang Diamond Co., Ltd. (SZSE:301071) insiders, who hold 49% of the firm would be disappointed by the recent pullback

Key Insights

• Significant insider control over Henan Liliang Diamond implies vested interests in company growth
• A total of 3 investors have a majority stake in the company with 51% ownership
• 10% of Henan Liliang Diamond is held by Institutions

To get a sense of who is truly in control of Henan Liliang Diamond Co., Ltd. (SZSE:301071), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 49% 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¥6.6b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Henan Liliang Diamond, beginning with the chart below.

Check out our latest analysis for Henan Liliang Diamond

What Does The Institutional Ownership Tell Us About Henan Liliang Diamond?

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 Henan Liliang Diamond does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Henan Liliang Diamond, (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 Henan Liliang Diamond. Looking at our data, we can see that the largest shareholder is Zengming Shao with 34% of shares outstanding. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 2.5% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Henan Liliang Diamond

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 a reasonable proportion of Henan Liliang Diamond Co., Ltd.. Insiders have a CN¥3.2b stake in this CN¥6.6b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 37% stake in the company, and hence can't easily be ignored. 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

Our data indicates that Private Companies hold 4.2%, of the company's shares. 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. Be aware that Henan Liliang Diamond is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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