Edianyun Limited's (HKG:2416) biggest owners are private equity firms who got richer after stock soared 12% last week

Key Insights

• Significant control over Edianyun 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
• Insiders have been buying lately

To get a sense of who is truly in control of Edianyun Limited (HKG:2416), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 33% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private equity firms benefitted the most after the company's market cap rose by HK$112m last week.

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

View our latest analysis for Edianyun

What Does The Lack Of Institutional Ownership Tell Us About Edianyun?

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 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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Edianyun, for yourself, below.

Edianyun is not owned by hedge funds. The company's CEO Pengcheng Ji is the largest shareholder with 15% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 14% and 13%, of the shares outstanding, respectively.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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. 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 Edianyun

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.

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 Edianyun Limited. Insiders own HK$260m worth of shares in the HK$1.1b company. 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

The general public-- including retail investors -- own 25% 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

Private equity firms hold a 33% stake in Edianyun. This suggests they can be influential in key policy decisions. 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.

Private Company Ownership

It seems that Private Companies own 17%, of the Edianyun 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Edianyun , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.