Do Insiders Own Lots Of Shares In Newborn Town Inc. (HKG:9911)?

By
Simply Wall St
Published
December 01, 2020

If you want to know who really controls Newborn Town Inc. (HKG:9911), then you'll have to look at the makeup of its share registry. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Newborn Town is a smaller company with a market capitalization of HK$1.8b, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions don't own many shares in the company. We can zoom in on the different ownership groups, to learn more about Newborn Town.

See our latest analysis for Newborn Town

SEHK:9911 Ownership Breakdown December 2nd 2020

What Does The Institutional Ownership Tell Us About Newborn Town?

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.

Institutions have a very small stake in Newborn Town. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

SEHK:9911 Earnings and Revenue Growth December 2nd 2020

Hedge funds don't have many shares in Newborn Town. With a 23% stake, CEO Chunhe Liu is the largest shareholder. With 8.9% and 7.3% of the shares outstanding respectively, Phoenix Auspicious FinTech Investment L.P and Ping Li are the second and third largest shareholders. Interestingly, the third-largest shareholder, Ping Li is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

On looking further, we found that 50% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Newborn Town

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems insiders own a significant proportion of Newborn Town Inc.. Insiders have a HK$656m stake in this HK$1.8b business. 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 holds a 35% stake in Newborn Town. 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 Company Ownership

It seems that Private Companies own 21%, of the Newborn Town 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Newborn Town better, we need to consider many other factors. Be aware that Newborn Town is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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. 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.
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