Launch Tech Company Limited's (HKG:2488) stock price dropped 11% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in Launch Tech indicates that they collectively have a greater say in management and business strategy
• The top 10 shareholders own 48% of the company
• Insider ownership in Launch Tech is 21%

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To get a sense of who is truly in control of Launch Tech Company Limited (HKG:2488), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 52% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors as a group endured the highest losses last week after market cap fell by HK$472m.

Let's delve deeper into each type of owner of Launch Tech, beginning with the chart below.

See our latest analysis for Launch Tech

What Does The Lack Of Institutional Ownership Tell Us About Launch Tech?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Launch Tech's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Launch Tech is not owned by hedge funds. The company's CEO Xin Liu is the largest shareholder with 19% of shares outstanding. With 14% and 11% of the shares outstanding respectively, Shenzhen Langqu Technology Development Company Limited and Shenzhen De Shi Yu are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 10 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Launch Tech

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Launch Tech Company Limited. Insiders own HK$829m worth of shares in the HK$3.9b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 52% of Launch Tech. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 26%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the 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. Take risks for example - Launch Tech has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.