Shenzhen Gas Corporation Ltd.'s (SHSE:601139) last week's 5.4% decline must have disappointed state or government who have a significant stake

Key Insights

• Significant control over Shenzhen Gas by state or government implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 56% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Shenzhen Gas Corporation Ltd. (SHSE:601139) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are state or government with 40% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to CN¥21b last week, state or government would have faced the highest losses than any other shareholder groups of the company.

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

Check out our latest analysis for Shenzhen Gas

What Does The Institutional Ownership Tell Us About Shenzhen Gas?

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 Gas already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Gas, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Shenzhen Gas. Shenzhen Municipal People's Government State-owned Assets Supervision and Administration Commission is currently the largest shareholder, with 40% of shares outstanding. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder.

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.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Shenzhen Gas

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.

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 Shenzhen Gas Corporation 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¥9.9m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shenzhen Gas. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 24%, 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.

Public Company Ownership

It appears to us that public companies own 16% of Shenzhen Gas. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen Gas better, we need to consider many other factors. For example, we've discovered 2 warning signs for Shenzhen Gas (1 is a bit concerning!) that you should be aware of before investing here.

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.