BOE Varitronix Limited's (HKG:710) stock price dropped 12% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in BOE Varitronix indicates that they collectively have a greater say in management and business strategy
• Beijing Electronics Holding Co.,Ltd owns 53% of the company
• Institutions own 17% of BOE Varitronix

To get a sense of who is truly in control of BOE Varitronix Limited (HKG:710), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 53% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 12% decline in share price, private companies suffered the most losses.

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

View our latest analysis for BOE Varitronix

What Does The Institutional Ownership Tell Us About BOE Varitronix?

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.

As you can see, institutional investors have a fair amount of stake in BOE Varitronix. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see BOE Varitronix's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in BOE Varitronix. Beijing Electronics Holding Co.,Ltd is currently the company's largest shareholder with 53% of shares outstanding. This implies that they have majority interest control of the future of the company. China Orient Asset Management (International) Holding Limited is the second largest shareholder owning 9.0% of common stock, and Chun-Shun Ko holds about 4.4% of the company stock.

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 BOE Varitronix

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 see that insiders own shares in BOE Varitronix Limited. In their own names, insiders own HK$193m worth of stock in the HK$4.0b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over BOE Varitronix. 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

It seems that Private Companies own 53%, of the BOE Varitronix 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for BOE Varitronix you should be aware of, and 1 of them is a bit concerning.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.