Individual investors who have a significant stake must be disappointed along with institutions after Weichai Power Co., Ltd.'s (HKG:2338) market cap dropped by HK$4.7b

Key Insights

• The considerable ownership by individual investors in Weichai Power indicates that they collectively have a greater say in management and business strategy
• 40% of the business is held by the top 25 shareholders
• 28% of Weichai Power is held by Institutions

To get a sense of who is truly in control of Weichai Power Co., Ltd. (HKG:2338), it is important to understand the ownership structure of the business. With 51% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 28% came under pressure after market cap dropped to HK$148b last week,individual investors took the most losses.

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

See our latest analysis for Weichai Power

What Does The Institutional Ownership Tell Us About Weichai Power?

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 Weichai Power does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Weichai Power'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 Weichai Power. Shandong Heavy Industry Group Co., Ltd. is currently the company's largest shareholder with 16% of shares outstanding. Weifang Investment Corporation Limited is the second largest shareholder owning 3.4% of common stock, and China Securities Finance Corp, Asset Management Arm holds about 1.9% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Weichai Power

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.

We can report that insiders do own shares in Weichai Power Co., Ltd.. The insiders have a meaningful stake worth HK$3.7b. we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 51% stake in Weichai Power, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

We can see that Private Companies own 19%, of the shares on issue. 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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.