Private companies among Hanhua Financial Holding Co., Ltd.'s (HKG:3903) largest stockholders and were hit after last week's 16% price drop

Key Insights

• Significant control over Hanhua Financial Holding by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 8 shareholders own 53% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Hanhua Financial Holding Co., Ltd. (HKG:3903), then you'll have to look at the makeup of its share registry. We can see that private companies own the lion's share in the company with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 16% decline in share price, private companies suffered the most losses.

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

View our latest analysis for Hanhua Financial Holding

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

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

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. Looking at our data, we can see that the largest shareholder is Chongqing Huitai Investment Co. Ltd with 9.8% of shares outstanding. For context, the second largest shareholder holds about 9.4% of the shares outstanding, followed by an ownership of 6.1% by the third-largest shareholder.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. 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 Hanhua Financial Holding

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Hanhua Financial Holding Co., Ltd.. It has a market capitalization of just HK$1.2b, and insiders have HK$92m 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

The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. 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

We can see that Private Companies own 56%, 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:

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 3 warning signs for Hanhua Financial Holding (2 don't sit too well with us) that you should be aware of.

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.

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