Ningbo Menovo Pharmaceutical Co., Ltd.'s (SHSE:603538) last week's 11% decline must have disappointed retail investors who have a significant stake

Key Insights

• Ningbo Menovo Pharmaceutical's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 42% of the company
• 14% of Ningbo Menovo Pharmaceutical is held by Institutions

Every investor in Ningbo Menovo Pharmaceutical Co., Ltd. (SHSE:603538) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors as a group endured the highest losses last week after market cap fell by CN¥280m.

In the chart below, we zoom in on the different ownership groups of Ningbo Menovo Pharmaceutical.

Check out our latest analysis for Ningbo Menovo Pharmaceutical

What Does The Institutional Ownership Tell Us About Ningbo Menovo 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.

We can see that Ningbo Menovo Pharmaceutical does have institutional investors; and they hold a good portion of the company's stock. 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 Ningbo Menovo Pharmaceutical's historic earnings and revenue below, but keep in mind there's always more to the story.

Ningbo Menovo Pharmaceutical is not owned by hedge funds. Ningbo Menovo Holding Group Co., Ltd. is currently the company's largest shareholder with 21% of shares outstanding. For context, the second largest shareholder holds about 5.5% of the shares outstanding, followed by an ownership of 2.7% by the third-largest shareholder. Cheng Zhi Yao, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Ningbo Menovo Pharmaceutical

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 report that insiders do own shares in Ningbo Menovo Pharmaceutical Co., Ltd.. It has a market capitalization of just CN¥2.4b, and insiders have CN¥180m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 58% stake in Ningbo Menovo Pharmaceutical, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 21%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Ningbo Menovo Pharmaceutical better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ningbo Menovo Pharmaceutical you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.