China Shengmu Organic Milk Limited's (HKG:1432) largest shareholders are retail investors who were rewarded as market cap surged HK$180m last week

Key Insights

• Significant control over China Shengmu Organic Milk by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 3 investors have a majority stake in the company with 53% ownership
• Insider ownership in China Shengmu Organic Milk is 18%

To get a sense of who is truly in control of China Shengmu Organic Milk Limited (HKG:1432), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 45% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors were the biggest beneficiaries of last week’s 14% gain.

Let's delve deeper into each type of owner of China Shengmu Organic Milk, beginning with the chart below.

Check out our latest analysis for China Shengmu Organic Milk

What Does The Lack Of Institutional Ownership Tell Us About China Shengmu Organic Milk?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

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. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of China Shengmu Organic Milk, for yourself, below.

We note that hedge funds don't have a meaningful investment in China Shengmu Organic Milk. China Mengniu Dairy Company Limited is currently the largest shareholder, with 31% of shares outstanding. In comparison, the second and third largest shareholders hold about 16% and 6.6% of the stock. Furthermore, CEO Jiawang Zhang is the owner of 1.8% of the company's shares.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 China Shengmu Organic Milk

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Our information suggests that insiders maintain a significant holding in China Shengmu Organic Milk Limited. It has a market capitalization of just HK$1.5b, and insiders have HK$257m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 45% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China Shengmu Organic Milk. 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

Our data indicates that Private Companies hold 6.6%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

It appears to us that public companies own 31% of China Shengmu Organic Milk. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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 1 warning sign for China Shengmu Organic Milk 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.

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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.