Air China Limited's (HKG:753) market cap dropped HK$3.7b last week; Private companies bore the brunt

Key Insights

• Significant control over Air China by private companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the company is held by a single shareholder (China National Aviation Corporation Limited)
• Institutional ownership in Air China is 11%

A look at the shareholders of Air China Limited (HKG:753) can tell us which group is most powerful. 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).

As a result, private companies as a group endured the highest losses last week after market cap fell by HK$3.7b.

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

Check out our latest analysis for Air China

What Does The Institutional Ownership Tell Us About Air China?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Air China. 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 Air China's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Air China. China National Aviation Corporation Limited is currently the largest shareholder, with 51% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Meanwhile, the second and third largest shareholders, hold 15% and 1.8%, of the shares outstanding, respectively.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Air China

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. 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

Our data indicates that Private Companies hold 53%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 15% of Air China stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.