Retail investors invested in Jiangsu Nhwa Pharmaceutical Co., LTD (SZSE:002262) copped the brunt of last week's CN¥894m market cap decline

Key Insights

• Jiangsu Nhwa Pharmaceutical's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 51% of the business is held by the top 6 shareholders
• Insider ownership in Jiangsu Nhwa Pharmaceutical is 18%

To get a sense of who is truly in control of Jiangsu Nhwa Pharmaceutical Co., LTD (SZSE:002262), it is important to understand the ownership structure of the business. With 34% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, retail investors endured the biggest losses as the stock fell by 3.3%.

Let's take a closer look to see what the different types of shareholders can tell us about Jiangsu Nhwa Pharmaceutical.

View our latest analysis for Jiangsu Nhwa Pharmaceutical

What Does The Institutional Ownership Tell Us About Jiangsu Nhwa 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 Jiangsu Nhwa Pharmaceutical. 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 Jiangsu Nhwa Pharmaceutical's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Jiangsu Nhwa Pharmaceutical. Looking at our data, we can see that the largest shareholder is Xuzhou Nhwa Investment Co., Ltd. with 32% of shares outstanding. Pengsheng Sun is the second largest shareholder owning 4.9% of common stock, and Zengliang Chen holds about 3.9% of the company stock. Zengliang Chen, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Jiangsu Nhwa Pharmaceutical

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 information suggests that insiders maintain a significant holding in Jiangsu Nhwa Pharmaceutical Co., LTD. Insiders own CN¥4.7b worth of shares in the CN¥26b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in Jiangsu Nhwa Pharmaceutical. 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 Company Ownership

We can see that Private Companies own 32%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the 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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.