Kangmei Pharmaceutical Co., Ltd.'s (SHSE:600518) market cap surged CN¥2.4b last week, retail investors who have a lot riding on the company were rewarded

Key Insights

• Significant control over Kangmei Pharmaceutical by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 25 shareholders own 40% of the company
• Institutions own 11% of Kangmei Pharmaceutical

To get a sense of who is truly in control of Kangmei Pharmaceutical Co., Ltd. (SHSE:600518), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 60% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors were the biggest beneficiaries of last week’s 9.0% gain.

Let's delve deeper into each type of owner of Kangmei Pharmaceutical, beginning with the chart below.

View our latest analysis for Kangmei Pharmaceutical

What Does The Institutional Ownership Tell Us About Kangmei Pharmaceutical?

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.

Kangmei Pharmaceutical already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Kangmei Pharmaceutical's historic earnings and revenue below, but keep in mind there's always more to the story.

Kangmei Pharmaceutical is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Guangdong Shennong Enterprise Management Partnership (Limited Partnership) with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.7% and 2.2% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Kangmei Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of Kangmei Pharmaceutical Co., Ltd. in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥112k worth of shares. 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 -- including retail investors -- own 60% of Kangmei Pharmaceutical. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 29%, of the shares on issue. 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. Take risks for example - Kangmei Pharmaceutical has 1 warning sign we think you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free 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.