Sichuan Kelun Pharmaceutical Co., Ltd.'s (SZSE:002422) stock price dropped 4.9% last week; individual investors would not be happy

Key Insights

• The considerable ownership by individual investors in Sichuan Kelun Pharmaceutical indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 49% of the company
• 27% of Sichuan Kelun Pharmaceutical is held by insiders

To get a sense of who is truly in control of Sichuan Kelun Pharmaceutical Co., Ltd. (SZSE:002422), it is important to understand the ownership structure of the business. With 45% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 4.9% decrease in the stock price last week, individual investors suffered the most losses, but insiders who own 27% stock also took a hit.

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

Check out our latest analysis for Sichuan Kelun Pharmaceutical

What Does The Institutional Ownership Tell Us About Sichuan Kelun 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 Sichuan Kelun 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 Sichuan Kelun 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 Sichuan Kelun Pharmaceutical. Gexin Liu is currently the largest shareholder, with 24% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 2.6% of the stock. In addition, we found that Sichuan Liu, the CEO has 0.5% of the shares allocated to their name.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sichuan Kelun Pharmaceutical

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. 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.

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.

It seems insiders own a significant proportion of Sichuan Kelun Pharmaceutical Co., Ltd.. It has a market capitalization of just CN¥49b, and insiders have CN¥13b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 45% stake in the company, and hence can't easily be ignored. 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

Our data indicates that Private Companies hold 5.9%, 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 Sichuan Kelun Pharmaceutical better, we need to consider many other factors. For instance, we've identified 2 warning signs for Sichuan Kelun Pharmaceutical that you should be aware of.

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.