Zhengyuan Zhihui Group Co.,Ltd.'s (SZSE:300645) market cap dropped CN¥178m last week; Retail investors bore the brunt

Key Insights

• Zhengyuan Zhihui GroupLtd's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 40% of the business is held by the top 25 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Zhengyuan Zhihui Group Co.,Ltd. (SZSE:300645) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

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

In the chart below, we zoom in on the different ownership groups of Zhengyuan Zhihui GroupLtd.

See our latest analysis for Zhengyuan Zhihui GroupLtd

What Does The Institutional Ownership Tell Us About Zhengyuan Zhihui GroupLtd?

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 Zhengyuan Zhihui GroupLtd does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Zhengyuan Zhihui GroupLtd, (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 Zhengyuan Zhihui GroupLtd. Hangzhou Zhengyuan Shunran Industrial Co., Ltd. is currently the company's largest shareholder with 26% of shares outstanding. With 3.5% and 2.7% of the shares outstanding respectively, Hangzhou Yikang Investment Management Co., Ltd. and Jian Chen are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. 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 Zhengyuan Zhihui GroupLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Zhengyuan Zhihui Group Co.,Ltd.. It has a market capitalization of just CN¥1.5b, and insiders have CN¥40m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 60% stake in Zhengyuan Zhihui GroupLtd, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

It seems that Private Companies own 31%, of the Zhengyuan Zhihui GroupLtd 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.

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 3 warning signs for Zhengyuan Zhihui GroupLtd you should know about.

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.

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