Hangzhou Mdk Opto Electronics Co.,Ltd's (SHSE:688079) stock price dropped 11% last week; private equity firms would not be happy

Key Insights

• Significant control over Hangzhou Mdk Opto ElectronicsLtd by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 51% of the company
• 12% of Hangzhou Mdk Opto ElectronicsLtd is held by Institutions

A look at the shareholders of Hangzhou Mdk Opto Electronics Co.,Ltd (SHSE:688079) can tell us which group is most powerful. With 41% stake, private equity firms 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).

As market cap fell to CN¥2.8b 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 Hangzhou Mdk Opto ElectronicsLtd.

View our latest analysis for Hangzhou Mdk Opto ElectronicsLtd

What Does The Institutional Ownership Tell Us About Hangzhou Mdk Opto ElectronicsLtd?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Hangzhou Mdk Opto ElectronicsLtd. 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 Hangzhou Mdk Opto ElectronicsLtd'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 Hangzhou Mdk Opto ElectronicsLtd. The company's largest shareholder is Lishui MDK Investment Partnership Enterprise (Limited Partnership), with ownership of 41%. Meanwhile, the second and third largest shareholders, hold 9.3% and 7.2%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Hangzhou Mdk Opto ElectronicsLtd

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 some shares in Hangzhou Mdk Opto Electronics Co.,Ltd. As individuals, the insiders collectively own CN¥263m worth of the CN¥2.8b company. 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

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hangzhou Mdk Opto ElectronicsLtd. 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 Equity Ownership

With an ownership of 41%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 9.9%, of the Hangzhou Mdk Opto ElectronicsLtd 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:

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. To that end, you should learn about the 3 warning signs we've spotted with Hangzhou Mdk Opto ElectronicsLtd (including 2 which are a bit unpleasant) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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