Private companies invested in Lee's Pharmaceutical Holdings Limited (HKG:950) copped the brunt of last week's HK$124m market cap decline

Key Insights

• Significant control over Lee's Pharmaceutical Holdings by private companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 4 shareholders
• Recent purchases by insiders

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

To get a sense of who is truly in control of Lee's Pharmaceutical Holdings Limited (HKG:950), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 36% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 13% decline in share price, private companies suffered the most losses.

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

See our latest analysis for Lee's Pharmaceutical Holdings

What Does The Institutional Ownership Tell Us About Lee's Pharmaceutical Holdings?

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 Lee's Pharmaceutical Holdings. 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. 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 Lee's Pharmaceutical Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Lee's Pharmaceutical Holdings is not owned by hedge funds. Huby Technology Limited is currently the largest shareholder, with 19% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 10.0% by the third-largest shareholder. Xiaoyi Li, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 Lee's Pharmaceutical Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders maintain a significant holding in Lee's Pharmaceutical Holdings Limited. It has a market capitalization of just HK$836m, and insiders have HK$99m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Lee's Pharmaceutical Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 14%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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

Our data indicates that Private Companies hold 36%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Lee's Pharmaceutical Holdings better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Lee's Pharmaceutical Holdings (including 1 which can't be ignored) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.