Retail investors invested in Shenzhen Lihexing Co.,Ltd. (SZSE:301013) copped the brunt of last week's CN¥323m market cap decline

Key Insights

• The considerable ownership by retail investors in Shenzhen LihexingLtd indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 46% of the company
• Insiders own 26% of Shenzhen LihexingLtd

Every investor in Shenzhen Lihexing Co.,Ltd. (SZSE:301013) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 53% 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.

While the holdings of retail investors took a hit after last week’s 12% price drop, insiders with their 26% also suffered.

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

Check out our latest analysis for Shenzhen LihexingLtd

What Does The Institutional Ownership Tell Us About Shenzhen LihexingLtd?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Shenzhen LihexingLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Shenzhen LihexingLtd'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 Shenzhen LihexingLtd. Looking at our data, we can see that the largest shareholder is the CEO Yipan Lin with 23% of shares outstanding. With 3.6% and 2.2% of the shares outstanding respectively, Shenzhen CMAF Management Co., Ltd. and Shenzhen Lihexing Investment Management Enterprise (Limited Partnership) are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Shenzhen LihexingLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 Shenzhen Lihexing Co.,Ltd.. Insiders have a CN¥593m stake in this CN¥2.3b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 53% of Shenzhen LihexingLtd shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen LihexingLtd better, we need to consider many other factors. For instance, we've identified 1 warning sign for Shenzhen LihexingLtd that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com