Recent 20% decline may not have gone down well with FriendTimes Inc. (HKG:6820) insiders who've been purchasing recently

Key Insights

• Significant insider control over FriendTimes implies vested interests in company growth
• 57% of the company is held by a single shareholder (Xiaohuang Jiang)
• Insiders have been buying lately

Every investor in FriendTimes Inc. (HKG:6820) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And looking at our data, we can see that insiders have bought shares recently. Their expectations, however, were not satisfied, as the market cap dropped to HK$2.3b over the past week.

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

See our latest analysis for FriendTimes

What Does The Institutional Ownership Tell Us About FriendTimes?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that FriendTimes does have institutional investors; and they hold a good portion of the company's stock. 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 FriendTimes' historic earnings and revenue below, but keep in mind there's always more to the story.

FriendTimes is not owned by hedge funds. The company's CEO Xiaohuang Jiang is the largest shareholder with 57% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Meanwhile, the second and third largest shareholders, hold 5.0% and 3.0%, of the shares outstanding, respectively.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of FriendTimes

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own the majority of FriendTimes Inc.. This means they can collectively make decisions for the company. Given it has a market cap of HK$2.3b, that means they have HK$1.3b worth of shares. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over FriendTimes. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with FriendTimes (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.