Wuhan Ligong Guangke Co., Ltd.'s (SZSE:300557) last week's 12% decline must have disappointed retail investors who have a significant stake

Key Insights

• The considerable ownership by retail investors in Wuhan Ligong Guangke indicates that they collectively have a greater say in management and business strategy
• The top 6 shareholders own 50% of the company
• Institutional ownership in Wuhan Ligong Guangke is 13%

Every investor in Wuhan Ligong Guangke Co., Ltd. (SZSE:300557) should be aware of the most powerful shareholder groups. With 46% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 12% decline in share price, retail investors suffered the most losses.

Let's delve deeper into each type of owner of Wuhan Ligong Guangke, beginning with the chart below.

See our latest analysis for Wuhan Ligong Guangke

What Does The Institutional Ownership Tell Us About Wuhan Ligong Guangke?

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 Wuhan Ligong Guangke 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. 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 Wuhan Ligong Guangke, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Wuhan Ligong Guangke. Wuhan Guanggu Fenghuo Technology Venture Capital Co., Ltd. is currently the company's largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 11% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 Wuhan Ligong Guangke

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.

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 information suggests that Wuhan Ligong Guangke Co., Ltd. insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It seems the board members have no more than CN¥16m worth of shares in the CN¥2.3b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

With a 46% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Wuhan Ligong Guangke. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 20% stake in Wuhan Ligong Guangke. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 10%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

It appears to us that public companies own 11% of Wuhan Ligong Guangke. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Wuhan Ligong Guangke (of which 1 is a bit unpleasant!) you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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