China Literature Limited's (HKG:772) biggest owners are public companies who got richer after stock soared 4.6% last week

Key Insights

• The considerable ownership by public companies in China Literature indicates that they collectively have a greater say in management and business strategy
• 56% of the company is held by a single shareholder (Tencent Holdings Limited)
• Institutional ownership in China Literature is 16%

A look at the shareholders of China Literature Limited (HKG:772) can tell us which group is most powerful. We can see that public companies own the lion's share in the company with 56% ownership. 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, public companies were the biggest beneficiaries of last week’s 4.6% gain.

In the chart below, we zoom in on the different ownership groups of China Literature.

Check out our latest analysis for China Literature

What Does The Institutional Ownership Tell Us About China Literature?

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.

China Literature already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 China Literature'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 China Literature. Looking at our data, we can see that the largest shareholder is Tencent Holdings Limited with 56% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Huayi Cao is the second largest shareholder owning 3.4% of common stock, and Krane Funds Advisors, LLC holds about 1.9% of the company stock.

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

Insider Ownership Of China Literature

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.

We can report that insiders do own shares in China Literature Limited. The insiders have a meaningful stake worth HK$923m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in China Literature. 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.

Public Company Ownership

We can see that public companies hold 56% of the China Literature shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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