Private equity firms are Heilongjiang ZBD Pharmaceutical Co., Ltd.'s (SHSE:603567) biggest owners and were hit after market cap dropped CN¥526m

Key Insights

• The considerable ownership by private equity firms in Heilongjiang ZBD Pharmaceutical indicates that they collectively have a greater say in management and business strategy
• 50% of the company is held by a single shareholder (Heilongjiang Chuangda Group Co., Ltd.)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of Heilongjiang ZBD Pharmaceutical Co., Ltd. (SHSE:603567) can tell us which group is most powerful. The group holding the most number of shares in the company, around 55% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by CN¥526m.

In the chart below, we zoom in on the different ownership groups of Heilongjiang ZBD Pharmaceutical.

See our latest analysis for Heilongjiang ZBD Pharmaceutical

What Does The Institutional Ownership Tell Us About Heilongjiang ZBD Pharmaceutical?

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 Heilongjiang ZBD Pharmaceutical. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Heilongjiang ZBD Pharmaceutical, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Heilongjiang ZBD Pharmaceutical. Heilongjiang Chuangda Group Co., Ltd. is currently the company's largest shareholder with 50% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 5.9% and 5.0% of the shares outstanding respectively, Hulin Longpeng Investment Center and Huzhou Saishi Investment Management Co., Ltd. are the second and third largest shareholders.

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. 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 Heilongjiang ZBD Pharmaceutical

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. 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.

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 Heilongjiang ZBD Pharmaceutical Co., Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. 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¥7.2m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Heilongjiang ZBD Pharmaceutical. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 55%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 6.2%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Heilongjiang ZBD Pharmaceutical better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Heilongjiang ZBD Pharmaceutical you should be aware of, and 1 of them is a bit concerning.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com