Private equity firms invested in Landfar Bio-medicine Co., Ltd (SZSE:000504) copped the brunt of last week's CN¥307m market cap decline

Key Insights

• Significant control over Landfar Bio-medicine by private equity firms implies that the general public has more power to influence management and governance-related decisions
• A total of 5 investors have a majority stake in the company with 51% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Landfar Bio-medicine Co., Ltd (SZSE:000504) should be aware of the most powerful shareholder groups. With 41% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 13% decline in share price, private equity firms suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Landfar Bio-medicine.

View our latest analysis for Landfar Bio-medicine

What Does The Institutional Ownership Tell Us About Landfar Bio-medicine?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Landfar Bio-medicine. 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 Landfar Bio-medicine, (below). Of course, keep in mind that there are other factors to consider, too.

Landfar Bio-medicine is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Hunan Caixin Venture Capital Co. Ltd with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 4.4% of the stock.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Landfar Bio-medicine

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can see that insiders own shares in Landfar Bio-medicine Co., Ltd. As individuals, the insiders collectively own CN¥35m worth of the CN¥2.0b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Landfar Bio-medicine. 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

Private equity firms hold a 41% stake in Landfar Bio-medicine. 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

It seems that Private Companies own 12%, of the Landfar Bio-medicine stock. 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 Landfar Bio-medicine better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Landfar Bio-medicine (of which 2 are significant!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.