Tongwei Co.,Ltd's (SHSE:600438) stock price dropped 5.5% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in TongweiLtd indicates that they collectively have a greater say in management and business strategy
• 50% of the business is held by the top 3 shareholders
• Institutions own 15% of TongweiLtd

Every investor in Tongwei Co.,Ltd (SHSE:600438) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private companies with 44% ownership. 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 5.5% decline in share price, private companies suffered the most losses.

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

See our latest analysis for TongweiLtd

What Does The Institutional Ownership Tell Us About TongweiLtd?

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.

TongweiLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 TongweiLtd'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 TongweiLtd. Looking at our data, we can see that the largest shareholder is Tongwei Group Co. Ltd with 44% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.9% and 1.3%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of TongweiLtd

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 data suggests that insiders own under 1% of Tongwei Co.,Ltd in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own CN¥81m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TongweiLtd. 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 44%, 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 TongweiLtd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with TongweiLtd (at least 1 which is concerning) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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