Fanli Digital Technology Co.,Ltd's (SHSE:600228) last week's 10% decline must have disappointed private companies who have a significant stake

Key Insights

• Significant control over Fanli Digital TechnologyLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 6 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Fanli Digital Technology Co.,Ltd (SHSE:600228) should be aware of the most powerful shareholder groups. With 46% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥350m.

Let's delve deeper into each type of owner of Fanli Digital TechnologyLtd, beginning with the chart below.

See our latest analysis for Fanli Digital TechnologyLtd

What Does The Institutional Ownership Tell Us About Fanli Digital TechnologyLtd?

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 Fanli Digital TechnologyLtd. 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. 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 Fanli Digital TechnologyLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Fanli Digital TechnologyLtd. Our data shows that Shanghai Xiangrui Enterprise Management Consulting Firm (Limited Partnership) is the largest shareholder with 20% of shares outstanding. With 8.9% and 7.1% of the shares outstanding respectively, Shanghai Hurui Enterprise Management Consulting Firm (Limited Partnership) and Jiangxi Air Media Advertising Co., Ltd. are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 Fanli Digital TechnologyLtd

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.

Shareholders would probably be interested to learn that insiders own shares in Fanli Digital Technology Co.,Ltd. As individuals, the insiders collectively own CN¥55m worth of the CN¥3.0b 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-- including retail investors -- own 40% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 6.2%, 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.

Private Company Ownership

Our data indicates that Private Companies hold 46%, 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. For example, we've discovered 3 warning signs for Fanli Digital TechnologyLtd (1 is concerning!) that you should be aware of before investing here.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.