Hinova Pharmaceuticals Inc.'s (SHSE:688302) market cap dropped CN¥338m last week; individual investors who hold 36% were hit as were institutions

Key Insights

• The considerable ownership by retail investors in Hinova Pharmaceuticals indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 13 shareholders
• 20% of Hinova Pharmaceuticals is held by insiders

To get a sense of who is truly in control of Hinova Pharmaceuticals Inc. (SHSE:688302), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 36% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions who own 25% came under pressure after market cap dropped to CN¥2.7b last week,retail investors took the most losses.

In the chart below, we zoom in on the different ownership groups of Hinova Pharmaceuticals.

See our latest analysis for Hinova Pharmaceuticals

What Does The Institutional Ownership Tell Us About Hinova Pharmaceuticals?

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.

Hinova Pharmaceuticals 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. 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 Hinova Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Hinova Pharmaceuticals. Looking at our data, we can see that the largest shareholder is the CEO Yuanwei Chen with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.7% and 3.9%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 13 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Hinova Pharmaceuticals

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.

Our most recent data indicates that insiders own a reasonable proportion of Hinova Pharmaceuticals Inc.. Insiders own CN¥548m worth of shares in the CN¥2.7b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 36% stake in Hinova Pharmaceuticals. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 8.7%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 8.4%, 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 Hinova Pharmaceuticals better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Hinova Pharmaceuticals you should be aware of, and 1 of them is concerning.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.