Individual investors among Central China Securities Co., Ltd.'s (HKG:1375) largest stockholders and were hit after last week's 8.5% price drop

Key Insights

• Central China Securities' significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 43% ownership
• 11% of Central China Securities is held by Institutions

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To get a sense of who is truly in control of Central China Securities Co., Ltd. (HKG:1375), it is important to understand the ownership structure of the business. With 56% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, individual investors endured the biggest losses as the stock fell by 8.5%.

In the chart below, we zoom in on the different ownership groups of Central China Securities.

View our latest analysis for Central China Securities

What Does The Institutional Ownership Tell Us About Central China Securities?

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.

Central China Securities already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Central China Securities' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Central China Securities. Henan Investment Group Co.,Ltd is currently the company's largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.4% and 3.0%, of the shares outstanding, respectively.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. 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 Central China Securities

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.

Shareholders would probably be interested to learn that insiders own shares in Central China Securities Co., Ltd.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around HK$211m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 56% of Central China Securities shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

With an ownership of 21%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 10%, of the Central China Securities stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Central China Securities 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.