Retail investors are Newborn Town Inc.'s (HKG:9911) biggest owners and were hit after market cap dropped HK$455m

Key Insights

• Significant control over Newborn Town by retail investors implies that the general public has more power to influence management and governance-related decisions
• 49% of the business is held by the top 12 shareholders
• Insider ownership in Newborn Town is 38%

Every investor in Newborn Town Inc. (HKG:9911) should be aware of the most powerful shareholder groups. With 51% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders who own 38% came under pressure after market cap dropped to HK$4.2b last week,retail investors took the most losses.

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

View our latest analysis for Newborn Town

What Does The Institutional Ownership Tell Us About Newborn Town?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Since institutions own only a small portion of Newborn Town, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. 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.

Hedge funds don't have many shares in Newborn Town. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Newborn Town's case, its Top Key Executive, Chunhe Liu, is the largest shareholder, holding 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.6% and 7.6%, of the shares outstanding, respectively. Furthermore, CEO Ping Li is the owner of 6.3% of the company's shares.

Our studies suggest that the top 12 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Newborn Town

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 Newborn Town Inc.. Insiders own HK$1.6b worth of shares in the HK$4.2b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 51% of Newborn Town shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

Our data indicates that Private Companies hold 7.6%, of the company's shares. 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. For instance, we've identified 2 warning signs for Newborn Town (1 makes us a bit uncomfortable) that you should be aware of.

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. 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.