Individual investors who have a significant stake must be disappointed along with institutions after Chengdu Kanghua Biological Products Co., Ltd.'s (SZSE:300841) market cap dropped by CN¥488m

Key Insights

• Significant control over Chengdu Kanghua Biological Products by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 7 shareholders own 52% of the company
• 19% of Chengdu Kanghua Biological Products is held by insiders

To get a sense of who is truly in control of Chengdu Kanghua Biological Products Co., Ltd. (SZSE:300841), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 33% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 20% came under pressure after market cap dropped to CN¥7.7b last week,individual investors took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Chengdu Kanghua Biological Products.

Check out our latest analysis for Chengdu Kanghua Biological Products

What Does The Institutional Ownership Tell Us About Chengdu Kanghua Biological Products?

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.

Chengdu Kanghua Biological Products already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Chengdu Kanghua Biological Products, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Chengdu Kanghua Biological Products. Our data shows that Aokang Group Co., Ltd. is the largest shareholder with 12% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 8.5% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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

Insider Ownership Of Chengdu Kanghua Biological Products

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.

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 information suggests that insiders maintain a significant holding in Chengdu Kanghua Biological Products Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥1.4b stake in this CN¥7.7b business. 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

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Chengdu Kanghua Biological Products. 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

With an ownership of 8.5%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 20%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Chengdu Kanghua Biological Products better, we need to consider many other factors. Be aware that Chengdu Kanghua Biological Products is showing 1 warning sign in our investment analysis , you should know about...

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.