What Is The Ownership Structure Like For Innovent Biologics, Inc. (HKG:1801)?

By
Simply Wall St
Published
May 24, 2021
SEHK:1801

Every investor in Innovent Biologics, Inc. (HKG:1801) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Innovent Biologics has a market capitalization of HK$131b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Innovent Biologics.

View our latest analysis for Innovent Biologics

ownership-breakdown
SEHK:1801 Ownership Breakdown May 24th 2021

What Does The Institutional Ownership Tell Us About Innovent Biologics?

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.

Innovent Biologics already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Innovent Biologics' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:1801 Earnings and Revenue Growth May 24th 2021

Innovent Biologics is not owned by hedge funds. SDIC Innovation Investment Management Co., Ltd. is currently the largest shareholder, with 7.7% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.1% and 6.3%, of the shares outstanding, respectively. De-Chao Yu, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Innovent Biologics

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

I can report that insiders do own shares in Innovent Biologics, Inc.. The insiders have a meaningful stake worth HK$10.0b. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 38% ownership, the general public have some degree of sway over Innovent Biologics. 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.

Private Equity Ownership

Private equity firms hold a 7.7% stake in Innovent Biologics. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Innovent Biologics has 1 warning sign we think you should be aware of.

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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