Retail investors invested in Zhonghang Electronic Measuring Instruments Co.,Ltd (SZSE:300114) copped the brunt of last week's CN¥2.7b market cap decline

Key Insights

• The considerable ownership by retail investors in Zhonghang Electronic Measuring InstrumentsLtd indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 2 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Zhonghang Electronic Measuring Instruments Co.,Ltd (SZSE:300114) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 40% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, retail investors as a group endured the highest losses last week after market cap fell by CN¥2.7b.

Let's delve deeper into each type of owner of Zhonghang Electronic Measuring InstrumentsLtd, beginning with the chart below.

Check out our latest analysis for Zhonghang Electronic Measuring InstrumentsLtd

What Does The Institutional Ownership Tell Us About Zhonghang Electronic Measuring InstrumentsLtd?

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 Zhonghang Electronic Measuring InstrumentsLtd does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Zhonghang Electronic Measuring InstrumentsLtd'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 Zhonghang Electronic Measuring InstrumentsLtd. The company's largest shareholder is Aviation Industry Corporation of China,Ltd., with ownership of 27%. In comparison, the second and third largest shareholders hold about 24% and 2.1% of the stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Zhonghang Electronic Measuring InstrumentsLtd

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 Zhonghang Electronic Measuring Instruments Co.,Ltd insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥5.5m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zhonghang Electronic Measuring InstrumentsLtd. 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

It seems that Private Companies own 28%, of the Zhonghang Electronic Measuring InstrumentsLtd 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.

Public Company Ownership

We can see that public companies hold 24% of the Zhonghang Electronic Measuring InstrumentsLtd shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Zhonghang Electronic Measuring InstrumentsLtd (1 is potentially serious) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.