Xiamen Faratronic Co., Ltd.'s (SHSE:600563) market cap dropped CN¥1.2b last week; individual investors who hold 43% were hit as were institutions

Key Insights

• Significant control over Xiamen Faratronic by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 4 shareholders own 54% of the company
• Institutional ownership in Xiamen Faratronic is 32%

Every investor in Xiamen Faratronic Co., Ltd. (SHSE:600563) should be aware of the most powerful shareholder groups. With 43% stake, private companies 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 institutions, who own 32% shares weren’t spared from last week’s CN¥1.2b market cap drop, private companies as a group suffered the maximum losses

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

Check out our latest analysis for Xiamen Faratronic

What Does The Institutional Ownership Tell Us About Xiamen Faratronic?

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.

Xiamen Faratronic already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Xiamen Faratronic's historic earnings and revenue below, but keep in mind there's always more to the story.

Xiamen Faratronic is not owned by hedge funds. The company's largest shareholder is Xiamen Farah development Corp, with ownership of 37%. Meanwhile, the second and third largest shareholders, hold 6.6% and 5.3%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Xiamen Faratronic

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.

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 less than 1% of Xiamen Faratronic Co., Ltd.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥91k worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Xiamen Faratronic. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 43%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Xiamen Faratronic better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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