Changhong Jiahua Holdings Limited's (HKG:3991) last week's 11% decline must have disappointed public companies who have a significant stake

Key Insights

• Changhong Jiahua Holdings' significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The largest shareholder of the company is Sichuan Changhong Electric Co.,Ltd. with a 77% stake
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Changhong Jiahua Holdings Limited (HKG:3991) can tell us which group is most powerful. With 77% stake, public companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, public companies as a group endured the highest losses last week after market cap fell by HK$180m.

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

See our latest analysis for Changhong Jiahua Holdings

What Does The Lack Of Institutional Ownership Tell Us About Changhong Jiahua Holdings?

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. Alternatively, there might be something about the company that has kept institutional investors away. Changhong Jiahua Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

We note that hedge funds don't have a meaningful investment in Changhong Jiahua Holdings. Sichuan Changhong Electric Co.,Ltd. is currently the company's largest shareholder with 77% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 4.5% and 3.2% of the stock. Jianqiu Zhu, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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. 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 Changhong Jiahua Holdings

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.

We can report that insiders do own shares in Changhong Jiahua Holdings Limited. In their own names, insiders own HK$86m worth of stock in the HK$1.5b company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Changhong Jiahua 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 Company Ownership

Our data indicates that Private Companies hold 3.2%, 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.

Public Company Ownership

We can see that public companies hold 77% of the Changhong Jiahua Holdings shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. For example, we've discovered 3 warning signs for Changhong Jiahua Holdings (2 are potentially serious!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.