With 57% ownership, Shandong Buchang Pharmaceuticals Co., Ltd. (SHSE:603858) insiders have a lot riding on the company's future

Key Insights

• Shandong Buchang Pharmaceuticals' significant insider ownership suggests inherent interests in company's expansion
• 52% of the company is held by a single shareholder (Tao Zhao)
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shandong Buchang Pharmaceuticals Co., Ltd. (SHSE:603858), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 57% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

With such a notable stake in the company, insiders would be highly incentivised to make value accretive decisions.

Let's take a closer look to see what the different types of shareholders can tell us about Shandong Buchang Pharmaceuticals.

View our latest analysis for Shandong Buchang Pharmaceuticals

What Does The Institutional Ownership Tell Us About Shandong Buchang Pharmaceuticals?

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.

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

Shandong Buchang Pharmaceuticals is not owned by hedge funds. The company's largest shareholder is Tao Zhao, with ownership of 52%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Shaoluan Liu is the second largest shareholder owning 2.4% of common stock, and Wei Yang holds about 2.0% of the company stock.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Shandong Buchang Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own the majority of Shandong Buchang Pharmaceuticals Co., Ltd.. This means they can collectively make decisions for the company. Given it has a market cap of CN¥17b, that means insiders have a whopping CN¥9.9b worth of shares in their own names. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shandong Buchang Pharmaceuticals. 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 3.9%, of the Shandong Buchang Pharmaceuticals stock. 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. Take risks for example - Shandong Buchang Pharmaceuticals has 2 warning signs we think you should be aware of.

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.