The recent 17% gain must have brightened CEO Chunxian Wei's week, GR Life Style Company Limited's (HKG:108) most bullish insider

Key Insights

• Insiders appear to have a vested interest in GR Life Style's growth, as seen by their sizeable ownership
• The top 2 shareholders own 70% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in GR Life Style Company Limited (HKG:108) should be aware of the most powerful shareholder groups. We can see that individual insiders own the lion's share in the company with 49% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, insiders benefitted the most after the company's market cap rose by HK$192m last week.

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

See our latest analysis for GR Life Style

What Does The Lack Of Institutional Ownership Tell Us About GR Life Style?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. GR Life Style's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in GR Life Style. The company's CEO Chunxian Wei is the largest shareholder with 45% of shares outstanding. For context, the second largest shareholder holds about 25% of the shares outstanding, followed by an ownership of 4.3% by the third-largest shareholder. Interestingly, the third-largest shareholder, Zhongmin Sun is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. 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 GR Life Style

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

It seems insiders own a significant proportion of GR Life Style Company Limited. It has a market capitalization of just HK$1.3b, and insiders have HK$644m worth of shares in their own names. 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

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over GR Life Style. 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

We can see that Private Companies own 25%, of the shares on issue. 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 GR Life Style better, we need to consider many other factors. For instance, we've identified 2 warning signs for GR Life Style (1 is significant) that you should be aware of.

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.