In this analysis, my focus will be on developing a perspective on China E-Information Technology Group Limited’s (HKG:8055) latest ownership structure, a less discussed, but important factor. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at 8055’s shareholders in more detail.
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. With an institutional ownership of 7.63%, 8055 doesn’t seem too exposed to higher volatility resulting from institutional trading.
Insider OwnershipI find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. Although individuals in 8055 hold only a 4.16% stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public OwnershipThe general public holds a substantial 74.53% stake in 8055, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company OwnershipAnother important group of owners for potential investors in 8055 are private companies that hold a stake of 13.68% in 8055. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect 8055’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Institutional ownership in 8055 is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, if you are building an investment case for 8055, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of China E-Information Technology Group’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is 8055’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has 8055 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 8055’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.