The recent 10% gain must have brightened CEO Huahong Zhang's week, Shanghai Smart Control Co., Ltd.'s (SZSE:001266) most bullish insider

Key Insights

• Shanghai Smart Control's significant insider ownership suggests inherent interests in company's expansion
• 59% of the business is held by the top 3 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Shanghai Smart Control Co., Ltd. (SZSE:001266), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit CN¥2.6b market cap following a 10% gain in the stock.

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

Check out our latest analysis for Shanghai Smart Control

What Does The Institutional Ownership Tell Us About Shanghai Smart Control?

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.

Less than 5% of Shanghai Smart Control is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

Hedge funds don't have many shares in Shanghai Smart Control. The company's CEO Huahong Zhang is the largest shareholder with 24% of shares outstanding. The second and third largest shareholders are Hongying Zeng and Hui Zeng, with an equal amount of shares to their name at 18%. Note that two of the top three shareholders are also Secretary and Member of the Board of Directors, respectively, once again pointing to significant ownership by company insiders.

After doing some more digging, we found that the top 3 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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Shanghai Smart Control

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders own more than half of Shanghai Smart Control Co., Ltd.. This gives them effective control of the company. So they have a CN¥1.5b stake in this CN¥2.6b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanghai Smart Control. 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 Company Ownership

Our data indicates that Private Companies hold 9.3%, of the company's shares. 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 Shanghai Smart Control better, we need to consider many other factors. Be aware that Shanghai Smart Control 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.