The recent HK$142m market cap decrease is likely to have disappointed insiders invested in Central China New Life Limited (HKG:9983)

Key Insights

• Significant insider control over Central China New Life implies vested interests in company growth
• Po Sum Wu owns 66% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

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If you want to know who really controls Central China New Life Limited (HKG:9983), then you'll have to look at the makeup of its share registry. We can see that individual insiders own the lion's share in the company with 70% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 12% decline in share price, insiders suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Central China New Life.

View our latest analysis for Central China New Life

What Does The Institutional Ownership Tell Us About Central China New Life?

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.

Central China New Life already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Central China New Life's historic earnings and revenue below, but keep in mind there's always more to the story.

Central China New Life is not owned by hedge funds. Po Sum Wu is currently the largest shareholder, with 66% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 6.6% and 4.9% of the stock. In addition, we found that Jun Wang, the CEO has 3.8% of the shares allocated to their name.

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. 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 Central China New Life

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.

It seems that insiders own more than half the Central China New Life Limited stock. This gives them a lot of power. So they have a HK$719m stake in this HK$1.0b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 19% stake in the company, and hence can't easily be ignored. 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 6.6%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Central China New Life better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Central China New Life (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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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.