Institutions profited after Lianlian DigiTech Co., Ltd.'s (HKG:2598) market cap rose HK$938m last week but private companies profited the most

Key Insights

• Lianlian DigiTech's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 54% of the business is held by the top 6 shareholders
• 19% of Lianlian DigiTech is held by insiders

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Every investor in Lianlian DigiTech Co., Ltd. (HKG:2598) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 31% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While private companies were the group that reaped the most benefits after last week’s 8.6% price gain, institutions also received a 26% cut.

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

Check out our latest analysis for Lianlian DigiTech

What Does The Institutional Ownership Tell Us About Lianlian DigiTech?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Lianlian DigiTech. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Lianlian DigiTech's earnings history below. Of course, the future is what really matters.

Lianlian DigiTech is not owned by hedge funds. Hangzhou Chuanglianzhixin Investment L.P. is currently the largest shareholder, with 15% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 8.3% by the third-largest shareholder. Zhengyu Zhang, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

We did some more digging and found that 6 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Lianlian DigiTech

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.

Our most recent data indicates that insiders own a reasonable proportion of Lianlian DigiTech Co., Ltd.. Insiders own HK$2.3b worth of shares in the HK$12b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Lianlian DigiTech. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 31%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Lianlian DigiTech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Lianlian DigiTech , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.