Guangzhou Automobile Group Co., Ltd.'s (HKG:2238) last week's 7.8% decline must have disappointed private companies who have a significant stake

Key Insights

• Significant control over Guangzhou Automobile Group by private companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is Guangzhou Automobile Industry Group Co. Ltd. with a 51% stake
• Institutions own 14% of Guangzhou Automobile Group

A look at the shareholders of Guangzhou Automobile Group Co., Ltd. (HKG:2238) can tell us which group is most powerful. The group holding the most number of shares in the company, around 54% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to HK$77b last week, private companies 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 Guangzhou Automobile Group.

Check out our latest analysis for Guangzhou Automobile Group

What Does The Institutional Ownership Tell Us About Guangzhou Automobile Group?

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.

We can see that Guangzhou Automobile Group does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Guangzhou Automobile Group's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Guangzhou Automobile Group. Guangzhou Automobile Industry Group Co. Ltd. is currently the company's largest shareholder with 51% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 3.8% and 1.8% of the shares outstanding respectively, Guangzhou Huiyin Tianyue Equity Investment Fund Management Co., Ltd. and BlackRock, Inc. are the second and third largest shareholders.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Guangzhou Automobile Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own less than 1% of Guangzhou Automobile Group Co., Ltd.. But they may have an indirect interest through a corporate structure that we haven't picked up on. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own HK$181m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Guangzhou Automobile Group. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 54%, of the Guangzhou Automobile Group stock. 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.

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. To that end, you should be aware of the 3 warning signs we've spotted with Guangzhou Automobile Group .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.