Legend Holdings Corporation's (HKG:3396) market cap dropped HK$1.1b last week; Private companies bore the brunt

Key Insights

• Significant control over Legend Holdings by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 3 investors have a majority stake in the company with 61% ownership
• 12% of Legend Holdings is held by Institutions

If you want to know who really controls Legend Holdings Corporation (HKG:3396), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private companies with 32% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by HK$1.1b.

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

Check out our latest analysis for Legend Holdings

What Does The Institutional Ownership Tell Us About Legend Holdings?

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.

Legend Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Legend Holdings' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Legend Holdings. Looking at our data, we can see that the largest shareholder is Chinese Academy of Sciences Holdings Co., Ltd. with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 20% and 12%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Legend Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Legend Holdings Corporation. This is a big company, so it is good to see this level of alignment. Insiders own HK$873m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Legend Holdings. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 29%, 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.

Private Company Ownership

We can see that Private Companies own 32%, of the shares on issue. 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. Be aware that Legend Holdings is showing 1 warning sign in our investment analysis , you should know about...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com