Guangzhou Newlife New Material CO., LTD's (SZSE:301323) market cap dropped CN¥432m last week; Private companies bore the brunt

Key Insights

• Significant control over Guangzhou Newlife New Material by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 3 shareholders own 57% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Guangzhou Newlife New Material CO., LTD (SZSE:301323), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥4.4b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Guangzhou Newlife New Material.

See our latest analysis for Guangzhou Newlife New Material

What Does The Institutional Ownership Tell Us About Guangzhou Newlife New Material?

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.

Guangzhou Newlife New Material already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Guangzhou Newlife New Material, (below). Of course, keep in mind that there are other factors to consider, too.

Guangzhou Newlife New Material is not owned by hedge funds. Ningbo New Life Enterprise Management Partnership Enterprise (Limited Partnership) is currently the company's largest shareholder with 35% of shares outstanding. With 14% and 7.6% of the shares outstanding respectively, Guangzhou Yishang Investment Co., Ltd. and Lei Liu are the second and third largest shareholders. Lei Liu, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Guangzhou Newlife New Material

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Guangzhou Newlife New Material CO., LTD. In their own names, insiders own CN¥335m worth of stock in the CN¥4.4b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in Guangzhou Newlife New Material. 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 56%, of the Guangzhou Newlife New Material stock. 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:

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. Case in point: We've spotted 2 warning signs for Guangzhou Newlife New Material you should be aware of, and 1 of them doesn't sit too well with us.

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.