Institutional owners may consider drastic measures as Pharmaron Beijing Co., Ltd.'s (SZSE:300759) recent CN¥1.8b drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Pharmaron Beijing's stock price might be vulnerable to their trading decisions
• 54% of the business is held by the top 5 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Pharmaron Beijing Co., Ltd. (SZSE:300759) can tell us which group is most powerful. With 43% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 3.4% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 2.8% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Pharmaron Beijing's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Pharmaron Beijing.

See our latest analysis for Pharmaron Beijing

What Does The Institutional Ownership Tell Us About Pharmaron Beijing?

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.

Pharmaron Beijing 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Pharmaron Beijing's earnings history below. Of course, the future is what really matters.

Pharmaron Beijing is not owned by hedge funds. CITIC Securities Company Limited, Asset Management Arm is currently the largest shareholder, with 17% of shares outstanding. Citic M&A Fund Management Co., Ltd. is the second largest shareholder owning 16% of common stock, and Pharmaron Holdings Limited holds about 10% of the company stock.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Pharmaron Beijing

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Pharmaron Beijing Co., Ltd.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CN¥3.6b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Pharmaron Beijing. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 16% stake in Pharmaron Beijing. 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

Our data indicates that Private Companies hold 12%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Pharmaron Beijing that you should be aware of.

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.