Shanghai New Vision Microelectronics Co., Ltd's (SHSE:688593) market cap dropped CN¥435m last week; Private companies bore the brunt

Key Insights

• Significant control over Shanghai New Vision Microelectronics by private companies implies that the general public has more power to influence management and governance-related decisions
• 53% of the business is held by the top 8 shareholders
• 10% of Shanghai New Vision Microelectronics is held by Institutions

To get a sense of who is truly in control of Shanghai New Vision Microelectronics Co., Ltd (SHSE:688593), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% 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¥435m.

Let's take a closer look to see what the different types of shareholders can tell us about Shanghai New Vision Microelectronics.

View our latest analysis for Shanghai New Vision Microelectronics

What Does The Institutional Ownership Tell Us About Shanghai New Vision Microelectronics?

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 Shanghai New Vision Microelectronics. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Shanghai New Vision Microelectronics' earnings history below. Of course, the future is what really matters.

Shanghai New Vision Microelectronics is not owned by hedge funds. New Vision Microelectronics Inc. is currently the company's largest shareholder with 17% of shares outstanding. The second and third largest shareholders are Beijing YanDong MicroElectronic Co., Ltd. and Ke Hong Xin (Hong Kong) Co., Ltd., with an equal amount of shares to their name at 6.3%. Additionally, the company's CEO Peter Hong Xiao directly holds 5.3% of the total shares outstanding.

We did some more digging and found that 8 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Shanghai New Vision Microelectronics

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.

Shareholders would probably be interested to learn that insiders own shares in Shanghai New Vision Microelectronics Co., Ltd. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CN¥760m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 32% stake in the company, and hence can't easily be ignored. 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

With a stake of 5.4%, private equity firms could influence the Shanghai New Vision Microelectronics 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

It seems that Private Companies own 34%, of the Shanghai New Vision Microelectronics stock. 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.

Public Company Ownership

We can see that public companies hold 8.8% of the Shanghai New Vision Microelectronics 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shanghai New Vision Microelectronics (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

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

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.