After the recent decline, Paradise Entertainment Limited (HKG:1180) CEO Jay Chun's holdings have lost 13% of their value

Key Insights

• Insiders appear to have a vested interest in Paradise Entertainment's growth, as seen by their sizeable ownership
• The largest shareholder of the company is Jay Chun with a 60% stake
• 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 Paradise Entertainment Limited (HKG:1180), 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 62% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to HK$800m last week, insiders would have faced the highest losses than any other shareholder groups of the company.

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

See our latest analysis for Paradise Entertainment

What Does The Institutional Ownership Tell Us About Paradise Entertainment?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Paradise Entertainment. 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. 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 Paradise Entertainment'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 Paradise Entertainment. The company's CEO Jay Chun is the largest shareholder with 60% of shares outstanding. This implies that they possess majority interests and have significant control over the company. Investors usually consider it a good sign when the company leadership has such a significant stake, as this is widely perceived to increase the chance that the management will act in the best interests of the company. With 5.0% and 2.5% of the shares outstanding respectively, Fidelity International Ltd and Shiyong Shan are the second and third largest shareholders. Interestingly, the third-largest shareholder, Shiyong Shan is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Paradise Entertainment

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. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems that insiders own more than half the Paradise Entertainment Limited stock. This gives them a lot of power. Given it has a market cap of HK$800m, that means they have HK$500m worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Paradise Entertainment. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Paradise Entertainment better, we need to consider many other factors. Take risks for example - Paradise Entertainment has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.