Private companies are Loongson Technology Corporation Limited's (SHSE:688047) biggest owners and were rewarded after market cap rose by CN¥11b last week

Key Insights

• Loongson Technology's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 4 investors have a majority stake in the company with 55% ownership
• 17% of Loongson Technology is held by Institutions

To get a sense of who is truly in control of Loongson Technology Corporation Limited (SHSE:688047), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private companies benefitted the most after the company's market cap rose by CN¥11b last week.

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

Check out our latest analysis for Loongson Technology

What Does The Institutional Ownership Tell Us About Loongson Technology?

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.

Loongson Technology 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 Loongson Technology'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 Loongson Technology. Beijing Tiantong Xinyuan Technology Co., Ltd. is currently the largest shareholder, with 22% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 19% and 7.5%, of the shares outstanding, respectively.

Our research also brought to light the fact that roughly 55% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Loongson Technology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 suggests that insiders own under 1% of Loongson Technology Corporation Limited 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¥30k worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Loongson 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 Equity Ownership

With a stake of 19%, private equity firms could influence the Loongson Technology board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 50%, of the company's shares. 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:

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. Be aware that Loongson Technology 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.