Retail investors are Hengfeng Information Technology Co., Ltd.'s (SZSE:300605) biggest owners and were hit after market cap dropped CN¥275m

Key Insights

• Hengfeng Information Technology's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 49% of the company
• Insider ownership in Hengfeng Information Technology is 40%

To get a sense of who is truly in control of Hengfeng Information Technology Co., Ltd. (SZSE:300605), it is important to understand the ownership structure of the business. With 51% stake, retail investors possess the maximum shares in the company. 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 40% came under pressure after market cap dropped to CN¥2.1b last week,retail investors took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Hengfeng Information Technology.

See our latest analysis for Hengfeng Information Technology

What Does The Institutional Ownership Tell Us About Hengfeng Information Technology?

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.

We can see that Hengfeng Information Technology 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 Hengfeng Information Technology, (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 Hengfeng Information Technology. Xiao Xi Wei is currently the largest shareholder, with 25% of shares outstanding. With 11% and 5.0% of the shares outstanding respectively, Lin Jie Ou and Shanghai Xuanding Asset Management Co., Ltd. are the second and third largest shareholders. Lin Jie Ou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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 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. 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 Hengfeng Information Technology

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Hengfeng Information Technology Co., Ltd.. It has a market capitalization of just CN¥2.1b, and insiders have CN¥838m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public -- including retail investors -- own 51% of Hengfeng Information Technology. 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.

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Hengfeng Information Technology (of which 2 are a bit unpleasant!) you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.