Retail investors in Hua Medicine (Shanghai) Ltd. (HKG:2552) are its biggest bettors, and their bets paid off as stock gained 12% last week

Key Insights

• Significant control over Hua Medicine (Shanghai) by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 18 shareholders own 43% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Hua Medicine (Shanghai) Ltd. (HKG:2552), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 57% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors collectively scored the highest last week as the company hit HK$2.3b market cap following a 12% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Hua Medicine (Shanghai).

See our latest analysis for Hua Medicine (Shanghai)

What Does The Institutional Ownership Tell Us About Hua Medicine (Shanghai)?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Hua Medicine (Shanghai) 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. 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 Hua Medicine (Shanghai)'s earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Hua Medicine (Shanghai). Looking at our data, we can see that the largest shareholder is Arch Venture Partners, L.P. with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 7.6%, of the shares outstanding, respectively. In addition, we found that Li Chen, the CEO has 4.0% of the shares allocated to their name.

A deeper look at our ownership data shows that the top 18 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Hua Medicine (Shanghai)

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.

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.

Our most recent data indicates that insiders own some shares in Hua Medicine (Shanghai) Ltd.. It has a market capitalization of just HK$2.3b, and insiders have HK$109m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public -- including retail investors -- own 57% of Hua Medicine (Shanghai). 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 Equity Ownership

With a stake of 31%, private equity firms could influence the Hua Medicine (Shanghai) 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.

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 risks, for instance. Every company has them, and we've spotted 2 warning signs for Hua Medicine (Shanghai) you should know about.

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.