First Shanghai Investments Limited's (HKG:227) market cap surged HK$99m last week, private equity firms who have a lot riding on the company were rewarded

Explore First Shanghai Investments's Fair Values from the Community and select yours

Key Insights

• Significant control over First Shanghai Investments by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 54% of the company
• Insiders own 20% of First Shanghai Investments

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

To get a sense of who is truly in control of First Shanghai Investments Limited (HKG:227), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms collectively scored the highest last week as the company hit HK$975m market cap following a 11% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about First Shanghai Investments.

See our latest analysis for First Shanghai Investments

What Does The Lack Of Institutional Ownership Tell Us About First Shanghai Investments?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. Alternatively, there might be something about the company that has kept institutional investors away. First Shanghai Investments 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 First Shanghai Investments. China Assets (Holdings) Limited is currently the company's largest shareholder with 41% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 5.5% by the third-largest shareholder. Yuen Yat Lo, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 54% stake.

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. 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 First Shanghai Investments

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 First Shanghai Investments Limited. Insiders have a HK$196m stake in this HK$975m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 39% ownership, the general public, mostly comprising of individual investors, have some degree of sway over First Shanghai Investments. 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 Equity Ownership

With an ownership of 41%, 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for First Shanghai Investments that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.