Retail investors who have a significant stake must be disappointed along with institutions after Zhejiang Xianju Pharmaceutical Co.,Ltd.'s (SZSE:002332) market cap dropped by CN¥425m

Key Insights

• Zhejiang Xianju PharmaceuticalLtd's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 45% ownership
• 27% of Zhejiang Xianju PharmaceuticalLtd is held by Institutions

To get a sense of who is truly in control of Zhejiang Xianju Pharmaceutical Co.,Ltd. (SZSE:002332), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of retail investors took a hit after last week’s 4.1% price drop, institutions with their 27% holdings also suffered.

In the chart below, we zoom in on the different ownership groups of Zhejiang Xianju PharmaceuticalLtd.

Check out our latest analysis for Zhejiang Xianju PharmaceuticalLtd

What Does The Institutional Ownership Tell Us About Zhejiang Xianju PharmaceuticalLtd?

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 Zhejiang Xianju PharmaceuticalLtd. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Zhejiang Xianju PharmaceuticalLtd, (below). Of course, keep in mind that there are other factors to consider, too.

Zhejiang Xianju PharmaceuticalLtd is not owned by hedge funds. Zhejiang Xianju Development Holdings Co., Ltd is currently the largest shareholder, with 22% of shares outstanding. For context, the second largest shareholder holds about 1.8% of the shares outstanding, followed by an ownership of 1.5% by the third-largest shareholder.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Zhejiang Xianju PharmaceuticalLtd

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 data cannot confirm that board members are holding shares personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

The general public -- including retail investors -- own 52% of Zhejiang Xianju PharmaceuticalLtd. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 22%, of the Zhejiang Xianju PharmaceuticalLtd 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 Zhejiang Xianju PharmaceuticalLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Zhejiang Xianju PharmaceuticalLtd , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.