Painful week for individual investors invested in WuXi Biologics (Cayman) Inc. (HKG:2269) after 6.7% drop, institutions also suffered losses

Key Insights

• Significant control over WuXi Biologics (Cayman) by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 25 shareholders own 40% of the company
• Insiders have been selling lately

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Every investor in WuXi Biologics (Cayman) Inc. (HKG:2269) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 53% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions, who own 34% shares weren’t spared from last week’s HK$9.8b market cap drop, individual investors as a group suffered the maximum losses

Let's delve deeper into each type of owner of WuXi Biologics (Cayman), beginning with the chart below.

View our latest analysis for WuXi Biologics (Cayman)

What Does The Institutional Ownership Tell Us About WuXi Biologics (Cayman)?

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.

As you can see, institutional investors have a fair amount of stake in WuXi Biologics (Cayman). 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of WuXi Biologics (Cayman), (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in WuXi Biologics (Cayman). The company's largest shareholder is Wuxi Biologics Holdings Limited, with ownership of 12%. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of WuXi Biologics (Cayman)

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

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 data suggests that insiders own under 1% of WuXi Biologics (Cayman) Inc. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own HK$739m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 53% of WuXi Biologics (Cayman) shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

Our data indicates that Private Companies hold 12%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private 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. Be aware that WuXi Biologics (Cayman) is showing 1 warning sign in our investment analysis , you should know about...

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.