Private equity firms invested in Hangzhou Mdk Opto Electronics Co.,Ltd. (SHSE:688079) copped the brunt of last week's CN¥442m market cap decline

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
• A total of 3 investors have a majority stake in the company with 57% ownership
• 11% of Hangzhou Mdk Opto ElectronicsLtd is held by Institutions

If you want to know who really controls Hangzhou Mdk Opto Electronics Co.,Ltd. (SHSE:688079), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private equity firms with 42% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CN¥3.3b 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.

Check out our latest analysis for Hangzhou Mdk Opto ElectronicsLtd

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

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.

We can see that Hangzhou Mdk Opto ElectronicsLtd does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Hangzhou Mdk Opto ElectronicsLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Hangzhou Mdk Opto ElectronicsLtd. Lishui MDK Investment Partnership Enterprise (Limited Partnership) is currently the largest shareholder, with 42% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.5% and 7.2% of the stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Hangzhou Mdk Opto ElectronicsLtd

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.

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.. In their own names, insiders own CN¥286m worth of stock in the CN¥3.3b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 42% stake in Hangzhou Mdk Opto ElectronicsLtd. This suggests they can be influential in key policy decisions. 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

Our data indicates that Private Companies hold 9.9%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Hangzhou Mdk Opto ElectronicsLtd is showing 2 warning signs in our investment analysis , you should know about...

Of course this may not be the best stock to buy. So take a peek at this free 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.