Insiders continue to buy Hongcheng Environmental Technology Company Limited (HKG:2265) and now own 60% shares

Key Insights

• Significant insider control over Hongcheng Environmental Technology implies vested interests in company growth
• The largest shareholder of the company is Zeming Liu with a 60% stake
• Insiders have been buying lately

To get a sense of who is truly in control of Hongcheng Environmental Technology Company Limited (HKG:2265), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Insiders who purchased recently should be particularly happy after the stock gained 12% in the past week.

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

See our latest analysis for Hongcheng Environmental Technology

What Does The Lack Of Institutional Ownership Tell Us About Hongcheng Environmental Technology?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

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. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Hongcheng Environmental Technology might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Hongcheng Environmental Technology. Our data suggests that Zeming Liu, who is also the company's Top Key Executive, holds the most number of shares at 60%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. The second and third largest shareholders are Haiyan Sheng and Yirong Zhan, with an equal amount of shares to their name at 0.1%. Interestingly, the second and third-largest shareholders also happen to be the Chief Technology Officer and Member of the Board of Directors, respectively. This once again signifies considerable insider ownership amongst the company's top shareholders.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Hongcheng Environmental Technology

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 the majority of Hongcheng Environmental Technology Company Limited. This means they can collectively make decisions for the company. So they have a HK$556m stake in this HK$930m business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hongcheng Environmental Technology. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Hongcheng Environmental Technology better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hongcheng Environmental Technology you should know about.

Of course this may not be the best stock to buy. So take a peek at this free 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.