The recent pullback must have dismayed Fangzhou Inc. (HKG:6086) insiders who own 40% of the company

Key Insights

• Insiders appear to have a vested interest in Fangzhou's growth, as seen by their sizeable ownership
• A total of 3 investors have a majority stake in the company with 67% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

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To get a sense of who is truly in control of Fangzhou Inc. (HKG:6086), it is important to understand the ownership structure of the business. With 40% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to HK$5.1b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Fangzhou.

View our latest analysis for Fangzhou

What Does The Institutional Ownership Tell Us About Fangzhou?

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 Fangzhou 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Fangzhou, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 28% of Fangzhou shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Ares Management LLC is the largest shareholder with 28% of shares outstanding. Fangmin Xie is the second largest shareholder owning 21% of common stock, and Feng Zhou holds about 18% of the company stock. Interestingly, the bottom two of the top three shareholders also hold the title of Chief Executive Officer and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Fangzhou

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

It seems insiders own a significant proportion of Fangzhou Inc.. It has a market capitalization of just HK$5.1b, and insiders have HK$2.1b worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. 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.

Private Company Ownership

It seems that Private Companies own 8.7%, of the Fangzhou 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Fangzhou you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.