Shenzhen Sunmoon Microelectronics Co., Ltd's (SHSE:688699) stock price dropped 11% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in Shenzhen Sunmoon Microelectronics indicates that they collectively have a greater say in management and business strategy
• A total of 2 investors have a majority stake in the company with 53% ownership
• Insiders own 17% of Shenzhen Sunmoon Microelectronics

If you want to know who really controls Shenzhen Sunmoon Microelectronics Co., Ltd (SHSE:688699), 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 41% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 11% decline in share price, private companies suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Shenzhen Sunmoon Microelectronics.

Check out our latest analysis for Shenzhen Sunmoon Microelectronics

What Does The Institutional Ownership Tell Us About Shenzhen Sunmoon 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 Shenzhen Sunmoon Microelectronics. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Shenzhen Sunmoon Microelectronics' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Shenzhen Sunmoon Microelectronics. Looking at our data, we can see that the largest shareholder is Shenzhen Sunmoon Technology Co., Ltd. with 41% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 6.8%, of the shares outstanding, respectively. Additionally, the company's CEO Zhaohua Li directly holds 0.8% of the total shares outstanding.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Shenzhen Sunmoon Microelectronics

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Shenzhen Sunmoon Microelectronics Co., Ltd. Insiders own CN¥536m worth of shares in the CN¥3.1b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Shenzhen Sunmoon Microelectronics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 41%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Shenzhen Sunmoon Microelectronics is showing 1 warning sign in our investment analysis , you should know about...

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.

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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