Lanzhou Lishang Guochao Industrial Group Co.,Ltd's (SHSE:600738) market cap dropped CN¥309m last week; Private companies bore the brunt

Key Insights

• Significant control over Lanzhou Lishang Guochao Industrial GroupLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 54% of the company
• 12% of Lanzhou Lishang Guochao Industrial GroupLtd is held by insiders

Every investor in Lanzhou Lishang Guochao Industrial Group Co.,Ltd (SHSE:600738) should be aware of the most powerful shareholder groups. With 43% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥2.7b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Lanzhou Lishang Guochao Industrial GroupLtd, beginning with the chart below.

Check out our latest analysis for Lanzhou Lishang Guochao Industrial GroupLtd

What Does The Institutional Ownership Tell Us About Lanzhou Lishang Guochao Industrial GroupLtd?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Lanzhou Lishang Guochao Industrial GroupLtd does have institutional investors; and they hold a good portion of the company's stock. 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 Lanzhou Lishang Guochao Industrial GroupLtd, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Lanzhou Lishang Guochao Industrial GroupLtd. Lishui Nancheng New District Investment And Development Co., Ltd. is currently the company's largest shareholder with 22% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 8.0%, of the shares outstanding, respectively.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Lanzhou Lishang Guochao Industrial GroupLtd

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.

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.

It seems insiders own a significant proportion of Lanzhou Lishang Guochao Industrial Group Co.,Ltd. Insiders own CN¥317m worth of shares in the CN¥2.7b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lanzhou Lishang Guochao Industrial GroupLtd. 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

We can see that Private Companies own 43%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Lanzhou Lishang Guochao Industrial GroupLtd you should be aware of.

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.