The recent CN¥411m market cap decrease is likely to have disappointed insiders invested in Zhejiang Wecome Pharmaceutical Company Limited (SZSE:300878)

Key Insights

• Zhejiang Wecome Pharmaceutical's significant insider ownership suggests inherent interests in company's expansion
• 69% of the company is held by a single shareholder (Zhongliang Liu)
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Zhejiang Wecome Pharmaceutical Company Limited (SZSE:300878) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 70% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 14% decline in share price, insiders suffered the most losses.

Let's delve deeper into each type of owner of Zhejiang Wecome Pharmaceutical, beginning with the chart below.

Check out our latest analysis for Zhejiang Wecome Pharmaceutical

What Does The Institutional Ownership Tell Us About Zhejiang Wecome Pharmaceutical?

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.

Institutions have a very small stake in Zhejiang Wecome Pharmaceutical. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

Hedge funds don't have many shares in Zhejiang Wecome Pharmaceutical. Zhongliang Liu is currently the company's largest shareholder with 69% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 4.2% and 0.6% of the stock. Xiaoxia Kong, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Zhejiang Wecome Pharmaceutical

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

Our information suggests that insiders own more than half of Zhejiang Wecome Pharmaceutical Company Limited. This gives them effective control of the company. That means they own CN¥1.7b worth of shares in the CN¥2.5b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 24% stake in Zhejiang Wecome Pharmaceutical. 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 Company Ownership

Our data indicates that Private Companies hold 4.2%, of the company's shares. 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:

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. For example, we've discovered 3 warning signs for Zhejiang Wecome Pharmaceutical (2 don't sit too well with us!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.