Private equity firms invested in AInnovation Technology Group Co., Ltd (HKG:2121) copped the brunt of last week's HK$422m market cap decline

Key Insights

• Significant control over AInnovation Technology Group by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 52% of the business is held by the top 4 shareholders
• 17% of AInnovation Technology Group is held by insiders

To get a sense of who is truly in control of AInnovation Technology Group Co., Ltd (HKG:2121), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 35% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private equity firms as a group endured the highest losses last week after market cap fell by HK$422m.

Let's delve deeper into each type of owner of AInnovation Technology Group, beginning with the chart below.

See our latest analysis for AInnovation Technology Group

What Does The Institutional Ownership Tell Us About AInnovation Technology Group?

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.

AInnovation Technology Group 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of AInnovation Technology Group, (below). Of course, keep in mind that there are other factors to consider, too.

AInnovation Technology Group is not owned by hedge funds. Our data shows that Sinovation Ventures (Beijing) Enterprise Management Limited is the largest shareholder with 25% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 9.7% by the third-largest shareholder. Hui Xu, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of AInnovation Technology Group

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

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 AInnovation Technology Group Co., Ltd. Insiders own HK$590m worth of shares in the HK$3.6b company. 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-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 35%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 4.7%, of the AInnovation Technology Group stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for AInnovation Technology Group you should be aware of, and 1 of them makes us a bit uncomfortable.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.