Laekna, Inc.'s (HKG:2105) market cap dropped HK$392m last week; individual investors who hold 36% were hit as were institutions

Key Insights

• Significant control over Laekna by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 53% of the company
• Insiders own 16% of Laekna

A look at the shareholders of Laekna, Inc. (HKG:2105) can tell us which group is most powerful. With 36% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of private equity firms took a hit after last week’s 10% price drop, institutions with their 19% holdings also suffered.

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

See our latest analysis for Laekna

What Does The Institutional Ownership Tell Us About Laekna?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Laekna does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Laekna's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Laekna. With a 13% stake, CEO Xiangyang Lu is the largest shareholder. In comparison, the second and third largest shareholders hold about 13% and 9.6% of the stock.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Laekna

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Laekna, Inc.. Insiders have a HK$538m stake in this HK$3.4b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Laekna. 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

With a stake of 36%, private equity firms could influence the Laekna board. 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.

Private Company Ownership

It seems that Private Companies own 18%, of the Laekna stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 2 warning signs with Laekna , 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.