Zhejiang Jiuzhou Pharmaceutical Co., Ltd's (SHSE:603456) stock price dropped 4.1% last week; private companies would not be happy

Key Insights

• Zhejiang Jiuzhou Pharmaceutical's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 5 shareholders own 50% of the company
• 24% of Zhejiang Jiuzhou Pharmaceutical is held by Institutions

A look at the shareholders of Zhejiang Jiuzhou Pharmaceutical Co., Ltd (SHSE:603456) can tell us which group is most powerful. The group holding the most number of shares in the company, around 36% to be precise, is private companies. 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¥12b 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 Zhejiang Jiuzhou Pharmaceutical.

View our latest analysis for Zhejiang Jiuzhou Pharmaceutical

What Does The Institutional Ownership Tell Us About Zhejiang Jiuzhou 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.

Zhejiang Jiuzhou 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 Zhejiang Jiuzhou Pharmaceutical'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 Zhejiang Jiuzhou Pharmaceutical. Zhejiang ZoneBanner JiuZhou Group Co.,Ltd. is currently the largest shareholder, with 36% of shares outstanding. For context, the second largest shareholder holds about 7.0% of the shares outstanding, followed by an ownership of 3.5% by the third-largest shareholder. Lirong Hua, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

On looking further, we found that 50% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Zhejiang Jiuzhou Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Zhejiang Jiuzhou Pharmaceutical Co., Ltd. This is a big company, so it is good to see this level of alignment. Insiders own CN¥859m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 33% 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 Company Ownership

We can see that Private Companies own 36%, of the shares on issue. 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. For instance, we've identified 2 warning signs for Zhejiang Jiuzhou Pharmaceutical (1 can't be ignored) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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