Private equity firms invested in Tongdao Liepin Group (HKG:6100) copped the brunt of last week's HK$1.0b market cap decline

By
Simply Wall St
Published
April 14, 2022
SEHK:6100
Source: Shutterstock

A look at the shareholders of Tongdao Liepin Group (HKG:6100) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 29% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 27% shares weren’t spared from last week’s HK$1.0b market cap drop, private equity firms as a group suffered the maximum losses

In the chart below, we zoom in on the different ownership groups of Tongdao Liepin Group.

Check out our latest analysis for Tongdao Liepin Group

ownership-breakdown
SEHK:6100 Ownership Breakdown April 14th 2022

What Does The Institutional Ownership Tell Us About Tongdao Liepin Group?

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.

As you can see, institutional investors have a fair amount of stake in Tongdao Liepin Group. 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. 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 Tongdao Liepin Group's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:6100 Earnings and Revenue Growth April 14th 2022

It would appear that 8.1% of Tongdao Liepin Group shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's CEO Kebin Dai is the largest shareholder with 24% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 16% and 14%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Tongdao Liepin Group

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. 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.

Our information suggests that insiders maintain a significant holding in Tongdao Liepin Group. It is very interesting to see that insiders have a meaningful HK$2.2b stake in this HK$8.1b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Tongdao Liepin Group. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 29% stake in Tongdao Liepin Group. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 5.1%, 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.

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 Tongdao Liepin Group that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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