Be Friends Holding Limited's (HKG:1450) market cap dropped HK$166m last week; Retail investors bore the brunt

Key Insights

• Significant control over Be Friends Holding by retail investors implies that the general public has more power to influence management and governance-related decisions
• 46% of the business is held by the top 5 shareholders
• Insiders own 46% of Be Friends Holding

Every investor in Be Friends Holding Limited (HKG:1450) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders, who own 46% shares weren’t spared from last week’s HK$166m market cap drop, retail investors as a group suffered the maximum losses

Let's delve deeper into each type of owner of Be Friends Holding, beginning with the chart below.

See our latest analysis for Be Friends Holding

What Does The Lack Of Institutional Ownership Tell Us About Be Friends Holding?

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 could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Be Friends Holding's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

We note that hedge funds don't have a meaningful investment in Be Friends Holding. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Be Friends Holding's case, its Top Key Executive, Jun Li, is the largest shareholder, holding 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 19% and 3.4% of the stock. Interestingly, the third-largest shareholder, Chi Sum Lo is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

Our studies suggest that the top 5 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Be Friends 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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Be Friends Holding Limited. Insiders have a HK$562m stake in this HK$1.2b 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

The general public -- including retail investors -- own 54% of Be Friends Holding. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Be Friends Holding has 1 warning sign we think 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.