The recent CN¥165m market cap decrease is likely to have disappointed insiders invested in SMS Electric Co.,Ltd.Zhengzhou (SZSE:002857)

Key Insights

• SMS ElectricLtd.Zhengzhou's significant insider ownership suggests inherent interests in company's expansion
• A total of 6 investors have a majority stake in the company with 51% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in SMS Electric Co.,Ltd.Zhengzhou (SZSE:002857) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 37% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥1.5b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

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

Check out our latest analysis for SMS ElectricLtd.Zhengzhou

What Does The Institutional Ownership Tell Us About SMS ElectricLtd.Zhengzhou?

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.

We can see that SMS ElectricLtd.Zhengzhou does have institutional investors; and they hold a good portion of the company's stock. 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 SMS ElectricLtd.Zhengzhou, (below). Of course, keep in mind that there are other factors to consider, too.

SMS ElectricLtd.Zhengzhou is not owned by hedge funds. Shanghai Changyun Enterprise Management Partnership (Limited Partnership) is currently the company's largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 14% and 4.6% of the stock.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of SMS ElectricLtd.Zhengzhou

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of SMS Electric Co.,Ltd.Zhengzhou. Insiders own CN¥545m worth of shares in the CN¥1.5b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in SMS ElectricLtd.Zhengzhou. 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

We can see that Private Companies own 23%, 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:

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 4 warning signs for SMS ElectricLtd.Zhengzhou (1 is a bit unpleasant!) that you should be aware of before investing here.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.