Shenzhen Longsys Electronics Co., Ltd.'s (SZSE:301308) CEO Huabo Cai is the most upbeat insider, and their holdings increased by 9.1% last week

Key Insights

• Insiders appear to have a vested interest in Shenzhen Longsys Electronics' growth, as seen by their sizeable ownership
• The top 3 shareholders own 50% of the company
• Institutions own 16% of Shenzhen Longsys Electronics

To get a sense of who is truly in control of Shenzhen Longsys Electronics Co., Ltd. (SZSE:301308), 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 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by CN¥3.3b last week.

In the chart below, we zoom in on the different ownership groups of Shenzhen Longsys Electronics.

See our latest analysis for Shenzhen Longsys Electronics

What Does The Institutional Ownership Tell Us About Shenzhen Longsys Electronics?

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.

Shenzhen Longsys Electronics 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. 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 Shenzhen Longsys Electronics, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Shenzhen Longsys Electronics. With a 39% stake, CEO Huabo Cai is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 5.8% and 5.6%, of the shares outstanding, respectively. Interestingly, the third-largest shareholder, Zhixiong Li is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 50% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Shenzhen Longsys Electronics

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Shenzhen Longsys Electronics Co., Ltd.. This gives them effective control of the company. Given it has a market cap of CN¥40b, that means insiders have a whopping CN¥20b worth of shares in their own names. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 5.8%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 15%, 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:

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 instance, we've identified 2 warning signs for Shenzhen Longsys Electronics that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.