SMARTGEN (Zhengzhou) Technology Co., Ltd. (SZSE:301361) CEO Wenfeng Cui's holdings dropped 11% in value as a result of the recent pullback

Key Insights

• Insiders appear to have a vested interest in SMARTGEN (Zhengzhou) Technology's growth, as seen by their sizeable ownership
• 64% 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

To get a sense of who is truly in control of SMARTGEN (Zhengzhou) Technology Co., Ltd. (SZSE:301361), 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 74% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders as a group endured the highest losses after market cap fell by CN¥347m.

In the chart below, we zoom in on the different ownership groups of SMARTGEN (Zhengzhou) Technology.

Check out our latest analysis for SMARTGEN (Zhengzhou) Technology

What Does The Institutional Ownership Tell Us About SMARTGEN (Zhengzhou) Technology?

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.

Since institutions own only a small portion of SMARTGEN (Zhengzhou) Technology, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in SMARTGEN (Zhengzhou) Technology. The company's CEO Wenfeng Cui is the largest shareholder with 36% of shares outstanding. For context, the second largest shareholder holds about 28% of the shares outstanding, followed by an ownership of 8.6% by the third-largest shareholder. Interestingly, the third-largest shareholder, Lu Yang is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. 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 SMARTGEN (Zhengzhou) Technology

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.

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 insiders own more than half of SMARTGEN (Zhengzhou) Technology Co., Ltd.. This gives them effective control of the company. So they have a CN¥2.0b stake in this CN¥2.7b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 20% 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.

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 1 warning sign for SMARTGEN (Zhengzhou) Technology that you should be aware of.

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.

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