Henan Ancai Hi-Tech Co.,Ltd's (SHSE:600207) last week's 9.5% decline must have disappointed private equity firms who have a significant stake

Key Insights

• The considerable ownership by private equity firms in Henan Ancai Hi-TechLtd 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 54% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of Henan Ancai Hi-Tech Co.,Ltd (SHSE:600207) can tell us which group is most powerful. The group holding the most number of shares in the company, around 41% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥4.4b last week, private equity firms would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Henan Ancai Hi-TechLtd.

Check out our latest analysis for Henan Ancai Hi-TechLtd

What Does The Institutional Ownership Tell Us About Henan Ancai Hi-TechLtd?

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.

As you can see, institutional investors have a fair amount of stake in Henan Ancai Hi-TechLtd. 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. 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 Henan Ancai Hi-TechLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Henan Ancai Hi-TechLtd. The company's largest shareholder is Henan Investment Group Co.,Ltd, with ownership of 41%. With 13% and 2.7% of the shares outstanding respectively, Hon Hai Precision Industry Co., Ltd. and Xuchang City Investment Group Co.,Ltd are the second and third largest shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Henan Ancai Hi-TechLtd

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.

We can see that insiders own shares in Henan Ancai Hi-Tech Co.,Ltd. It has a market capitalization of just CN¥4.4b, and insiders have CN¥83m 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 32% stake in Henan Ancai Hi-TechLtd. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 41%, private equity firms could influence the Henan Ancai Hi-TechLtd board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 6.7%, of the Henan Ancai Hi-TechLtd stock. 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.

Public Company Ownership

It appears to us that public companies own 13% of Henan Ancai Hi-TechLtd. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Henan Ancai Hi-TechLtd you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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