SinoMab BioScience Limited's (HKG:3681) market cap dropped HK$175m last week; Retail investors bore the brunt

Key Insights

• The considerable ownership by retail investors in SinoMab BioScience indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 5 shareholders
• Insiders have been selling lately

To get a sense of who is truly in control of SinoMab BioScience Limited (HKG:3681), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% 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).

While insiders who own 32% came under pressure after market cap dropped to HK$1.2b last week,retail investors took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about SinoMab BioScience.

See our latest analysis for SinoMab BioScience

What Does The Lack Of Institutional Ownership Tell Us About SinoMab BioScience?

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 are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. SinoMab BioScience might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

SinoMab BioScience is not owned by hedge funds. The company's largest shareholder is Hainan Haiyao Co., Ltd., with ownership of 15%. Shui On Leung is the second largest shareholder owning 12% of common stock, and Apricot Oversea Holdings Limited holds about 9.9% of the company stock. Shui On Leung, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of SinoMab BioScience

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.

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.

It seems insiders own a significant proportion of SinoMab BioScience Limited. Insiders own HK$377m worth of shares in the HK$1.2b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. 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 Company Ownership

It seems that Private Companies own 19%, of the SinoMab BioScience 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.

Public Company Ownership

We can see that public companies hold 15% of the SinoMab BioScience shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand SinoMab BioScience better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with SinoMab BioScience (at least 3 which can't be ignored) , 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.