Linewell Software Co., Ltd.'s (SHSE:603636) market cap dropped CN¥650m last week; Retail investors bore the brunt

Key Insights

• Linewell Software's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 48% ownership
• Insider ownership in Linewell Software is 37%

Every investor in Linewell Software Co., Ltd. (SHSE:603636) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 52% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders who own 37% came under pressure after market cap dropped to CN¥9.2b last week,retail investors took the most losses.

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

Check out our latest analysis for Linewell Software

What Does The Institutional Ownership Tell Us About Linewell Software?

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.

Linewell Software 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. 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 Linewell Software's historic earnings and revenue below, but keep in mind there's always more to the story.

Linewell Software is not owned by hedge funds. Zhixiong Wu is currently the largest shareholder, with 35% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 2.5% of the stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Linewell Software

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 most recent data indicates that insiders own a reasonable proportion of Linewell Software Co., Ltd.. Insiders own CN¥3.4b worth of shares in the CN¥9.2b company. That's quite meaningful. 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

The general public -- including retail investors -- own 52% of Linewell Software. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 5.9%, of the Linewell Software stock. 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 Linewell Software is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

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.