Public companies account for 57% of China Literature Limited's (HKG:772) ownership, while individual investors account for 22%

Key Insights

• China Literature's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The largest shareholder of the company is Tencent Holdings Limited with a 57% stake
• Insiders have been selling lately

Every investor in China Literature Limited (HKG:772) should be aware of the most powerful shareholder groups. We can see that public companies own the lion's share in the company with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Meanwhile, individual investors make up 22% of the company’s shareholders.

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?

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

China Literature is not owned by hedge funds. Tencent Holdings Limited is currently the company's largest shareholder with 57% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. For context, the second largest shareholder holds about 3.4% of the shares outstanding, followed by an ownership of 2.1% by the third-largest shareholder.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of China Literature

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.

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.

Shareholders would probably be interested to learn that insiders own shares in China Literature Limited. The insiders have a meaningful stake worth HK$1.0b. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% 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

It appears to us that public companies own 57% of China Literature. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Take risks for example - China Literature has 1 warning sign we think 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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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.