China Security Co., Ltd.'s (SHSE:600654) market cap dropped CN¥3.4b last week; Private companies bore the brunt

Key Insights

• Significant control over China Security by private companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 6 shareholders
• 12% of China Security is held by Institutions

Every investor in China Security Co., Ltd. (SHSE:600654) should be aware of the most powerful shareholder groups. With 48% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private companies endured the biggest losses as the stock fell by 24%.

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

See our latest analysis for China Security

What Does The Institutional Ownership Tell Us About China Security?

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 China Security. 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. 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 China Security, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in China Security. The company's largest shareholder is China Security & Surveillance Technology, Inc., with ownership of 15%. In comparison, the second and third largest shareholders hold about 15% and 8.3% of the stock. Additionally, the company's CEO Bowen Wu directly holds 0.7% of the total shares outstanding.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 China Security

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can report that insiders do own shares in China Security Co., Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own CN¥127m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 39% stake in China Security. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 48%, of the China Security 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.

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. For example, we've discovered 2 warning signs for China Security that you should be aware of before investing here.

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.