Chongqing Machinery & Electric Co., Ltd.'s (HKG:2722) largest shareholders are private companies who were rewarded as market cap surged HK$442m last week

Key Insights

• Significant control over Chongqing Machinery & Electric by private companies implies that the general public has more power to influence management and governance-related decisions
• Chongqing Machinery And Electronics Holding (group) Co.,ltd. owns 55% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of Chongqing Machinery & Electric Co., Ltd. (HKG:2722), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private companies benefitted the most after the company's market cap rose by HK$442m last week.

Let's take a closer look to see what the different types of shareholders can tell us about Chongqing Machinery & Electric.

Check out our latest analysis for Chongqing Machinery & Electric

What Does The Institutional Ownership Tell Us About Chongqing Machinery & Electric?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Chongqing Machinery & Electric. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Chongqing Machinery & Electric's earnings history below. Of course, the future is what really matters.

Chongqing Machinery & Electric is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Chongqing Machinery And Electronics Holding (group) Co.,ltd. with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. The second and third largest shareholders are Chongqing Construction Engineering Group Corporation Limited and Chongqing Yufu Capital Operation Group Co., Ltd., with an equal amount of shares to their name at 6.3%.

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

Insider Ownership Of Chongqing Machinery & Electric

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.

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.

We note our data does not show any board members holding shares, personally. It is rare to see such a low level of personal ownership, amongst the board (and it is possible that our data might be incomplete). Concerned investors should check here to see if insiders have been selling or buying.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

Private equity firms hold a 6.3% stake in Chongqing Machinery & Electric. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

We can see that Private Companies own 55%, 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.

Public Company Ownership

We can see that public companies hold 6.3% of the Chongqing Machinery & Electric shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Chongqing Machinery & Electric (of which 1 shouldn't be ignored!) you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.