MLS Co., Ltd.'s (SZSE:002745) market cap rose CN¥890m last week; individual investors who hold 47% profited and so did insiders

Key Insights

• Significant control over MLS by individual investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 9 shareholders
• Insiders own 40% of MLS

To get a sense of who is truly in control of MLS Co., Ltd. (SZSE:002745), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 47% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Individual investors gained the most after market cap touched CN¥12b last week, while insiders who own 40% also benefitted.

Let's delve deeper into each type of owner of MLS, beginning with the chart below.

View our latest analysis for MLS

What Does The Institutional Ownership Tell Us About MLS?

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.

We can see that MLS does have institutional investors; and they hold a good portion of the company's stock. 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 MLS, (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 MLS. Looking at our data, we can see that the largest shareholder is the CEO Qing Huan Sun with 39% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.8% and 1.7% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of MLS

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.

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 MLS Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥4.8b stake in this CN¥12b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 47% ownership, the general public, mostly comprising of individual investors, have some degree of sway over MLS. 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 7.2%, of the company's shares. 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.

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 risks, for instance. Every company has them, and we've spotted 1 warning sign for MLS you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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