A HK$96m drop in the market cap of Fusen Pharmaceutical Company Limited (HKG:1652) is not what insiders like to see after purchasing shares recently

Key Insights

• Insiders appear to have a vested interest in Fusen Pharmaceutical's growth, as seen by their sizeable ownership
• A total of 2 investors have a majority stake in the company with 52% ownership
• Insiders have bought recently

To get a sense of who is truly in control of Fusen Pharmaceutical Company Limited (HKG:1652), it is important to understand the ownership structure of the business. With 54% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

It's interesting to note that insiders have been buying shares recently. However, with market cap down by HK$96m over the last week, their expectations were far from met.

In the chart below, we zoom in on the different ownership groups of Fusen Pharmaceutical.

View our latest analysis for Fusen Pharmaceutical

What Does The Lack Of Institutional Ownership Tell Us About Fusen Pharmaceutical?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Fusen Pharmaceutical, for yourself, below.

Fusen Pharmaceutical is not owned by hedge funds. From our data, we infer that the largest shareholder is Changcheng Cao (who also holds the title of Top Key Executive) with 28% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. In comparison, the second and third largest shareholders hold about 24% and 21% of the stock. Interestingly, the third-largest shareholder, Zhiming Cao is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Fusen Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders own more than half of Fusen Pharmaceutical Company Limited. This gives them effective control of the company. Given it has a market cap of HK$806m, that means they have HK$434m 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 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Fusen Pharmaceutical. 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 Company Ownership

We can see that Private Companies own 25%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Fusen Pharmaceutical , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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