Shanghai Rightongene Biotechnology Co., Ltd.'s (SHSE:688217) market cap dropped CN¥165m last week; Individual investors bore the brunt

Key Insights

• The considerable ownership by individual investors in Shanghai Rightongene Biotechnology indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 8 shareholders
• 20% of Shanghai Rightongene Biotechnology is held by insiders

Every investor in Shanghai Rightongene Biotechnology Co., Ltd. (SHSE:688217) should be aware of the most powerful shareholder groups. We can see that individual investors own the lion's share in the company with 34% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 13% price drop, insiders with their 20% also suffered.

In the chart below, we zoom in on the different ownership groups of Shanghai Rightongene Biotechnology.

See our latest analysis for Shanghai Rightongene Biotechnology

What Does The Institutional Ownership Tell Us About Shanghai Rightongene Biotechnology?

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 Shanghai Rightongene Biotechnology. 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. 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 Shanghai Rightongene Biotechnology, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Shanghai Rightongene Biotechnology. With a 18% stake, CEO Hui Xiong is the largest shareholder. With 10% and 8.9% of the shares outstanding respectively, Hangzhou Haoying Investment Management Partnership Enterprise (Limited Partnership) and Shanghai Boci Investment Partnership Enterprise (Limited Partnership) are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Shanghai Rightongene Biotechnology

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Shanghai Rightongene Biotechnology Co., Ltd.. Insiders own CN¥219m worth of shares in the CN¥1.1b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanghai Rightongene Biotechnology. 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

Private equity firms hold a 10% stake in Shanghai Rightongene Biotechnology. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 16%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Shanghai Rightongene Biotechnology better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shanghai Rightongene Biotechnology (at least 1 which is concerning) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.