KPC Pharmaceuticals,Inc.'s (SHSE:600422) market cap dropped CN¥553m last week; Retail investors bore the brunt

Key Insights

• Significant control over KPC PharmaceuticalsInc by retail investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 10 shareholders
• 23% of KPC PharmaceuticalsInc is held by Institutions

If you want to know who really controls KPC Pharmaceuticals,Inc. (SHSE:600422), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are retail investors with 37% 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¥11b last week, retail investors 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 KPC PharmaceuticalsInc.

Check out our latest analysis for KPC PharmaceuticalsInc

What Does The Institutional Ownership Tell Us About KPC PharmaceuticalsInc?

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 KPC PharmaceuticalsInc. 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 KPC PharmaceuticalsInc'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 KPC PharmaceuticalsInc. The company's largest shareholder is China Resources Company Limited, with ownership of 28%. For context, the second largest shareholder holds about 7.9% of the shares outstanding, followed by an ownership of 4.3% by the third-largest shareholder.

We did some more digging and found that 10 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of KPC PharmaceuticalsInc

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.

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 data suggests that insiders own under 1% of KPC Pharmaceuticals,Inc. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥44m worth of shares (at current prices). It is good to see board members owning shares, 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 37% stake in KPC PharmaceuticalsInc. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 37%, of the KPC PharmaceuticalsInc stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with KPC PharmaceuticalsInc .

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.