Hygon Information Technology Co., Ltd.'s (SHSE:688041) stock price dropped 6.3% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in Hygon Information Technology indicates that they collectively have a greater say in management and business strategy
• The top 4 shareholders own 52% of the company
• Institutional ownership in Hygon Information Technology is 22%

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Every investor in Hygon Information Technology Co., Ltd. (SHSE:688041) should be aware of the most powerful shareholder groups. With 40% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private companies endured the biggest losses as the stock fell by 6.3%.

In the chart below, we zoom in on the different ownership groups of Hygon Information Technology.

View our latest analysis for Hygon Information Technology

What Does The Institutional Ownership Tell Us About Hygon Information Technology?

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.

As you can see, institutional investors have a fair amount of stake in Hygon Information Technology. 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 Hygon Information Technology, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Hygon Information Technology. Our data shows that Dawning Information Industry Co., Ltd. is the largest shareholder with 28% of shares outstanding. With 11% and 7.2% of the shares outstanding respectively, Kunshan Fanhai Qingzhou Venture Capital Partnership Enterprise (Limited Partnership) and Chengdu Industry Investment Group Co.Ltd are the second and third largest shareholders.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in 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 Hygon Information Technology

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 data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Hygon Information Technology. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 40%, of the Hygon Information Technology stock. 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.

Public Company Ownership

We can see that public companies hold 28% of the Hygon Information Technology shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Hygon Information Technology .

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.