Wafer Works (Shanghai) Co., Ltd.'s (SHSE:688584) stock price dropped 5.8% last week; private companies would not be happy

Key Insights

• Significant control over Wafer Works (Shanghai) by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 2 investors have a majority stake in the company with 78% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Wafer Works (Shanghai) Co., Ltd. (SHSE:688584), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 49% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥532m.

Let's delve deeper into each type of owner of Wafer Works (Shanghai), beginning with the chart below.

View our latest analysis for Wafer Works (Shanghai)

What Does The Institutional Ownership Tell Us About Wafer Works (Shanghai)?

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.

Wafer Works (Shanghai) already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Wafer Works (Shanghai), (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Wafer Works (Shanghai). Silicon Technology Investment (Cayman) Corp. is currently the largest shareholder, with 48% of shares outstanding. For context, the second largest shareholder holds about 30% of the shares outstanding, followed by an ownership of 3.2% by the third-largest shareholder.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Wafer Works (Shanghai)

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 data suggests that insiders own under 1% of Wafer Works (Shanghai) 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. Keep in mind that it's a big company, and the insiders own CN¥10m worth of shares. The absolute value might be more important than the proportional share. 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

The general public, who are usually individual investors, hold a 14% stake in Wafer Works (Shanghai). 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 Equity Ownership

Private equity firms hold a 30% stake in Wafer Works (Shanghai). This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 49%, of the company's shares. 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.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Wafer Works (Shanghai) , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.