Hanhua Financial Holding Co., Ltd.'s (HKG:3903) biggest owners are private companies who got richer after stock soared 13% last week

Key Insights

• The considerable ownership by private companies in Hanhua Financial Holding indicates that they collectively have a greater say in management and business strategy
• 53% of the business is held by the top 8 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Hanhua Financial Holding Co., Ltd. (HKG:3903), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private companies benefitted the most after the company's market cap rose by HK$161m last week.

In the chart below, we zoom in on the different ownership groups of Hanhua Financial Holding.

Check out our latest analysis for Hanhua Financial Holding

What Does The Institutional Ownership Tell Us About Hanhua Financial Holding?

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.

Hanhua Financial Holding 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 Hanhua Financial Holding'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 Hanhua Financial Holding. Chongqing Huitai Investment Co. Ltd is currently the largest shareholder, with 9.8% of shares outstanding. With 9.4% and 6.1% of the shares outstanding respectively, Loncin Holdings Co., Ltd. and Chengdu Shunrunze Enterprise Management Consulting Co., Ltd. are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Hanhua Financial Holding

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 Hanhua Financial Holding Co., Ltd.. It has a market capitalization of just HK$1.4b, and insiders have HK$105m worth of shares, in their own names. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hanhua Financial Holding. 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 Company Ownership

It seems that Private Companies own 56%, of the Hanhua Financial Holding stock. 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:

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 Hanhua Financial Holding (1 doesn't sit too well with us) that you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.