In the wake of ENN Energy Holdings Limited's (HKG:2688) latest HK$5.6b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in ENN Energy Holdings implies that they have significant influence over the company's share price
• 51% of the business is held by the top 3 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of ENN Energy Holdings Limited (HKG:2688) can tell us which group is most powerful. The group holding the most number of shares in the company, around 44% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to HK$58b last week after a 8.8% drop in the share price. The recent loss, which adds to a one-year loss of 40% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell ENN Energy Holdings, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of ENN Energy Holdings.

Check out our latest analysis for ENN Energy Holdings

What Does The Institutional Ownership Tell Us About ENN Energy 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.

We can see that ENN Energy Holdings does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of ENN Energy Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in ENN Energy Holdings. ENN Natural Gas Co.,Ltd. is currently the largest shareholder, with 34% of shares outstanding. With 11% and 6.0% of the shares outstanding respectively, Capital Research and Management Company and BlackRock, Inc. are the second and third largest shareholders.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of ENN Energy 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.

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.

Our information suggests that ENN Energy Holdings Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$3.4m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in ENN Energy 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.

Public Company Ownership

It appears to us that public companies own 34% of ENN Energy Holdings. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand ENN Energy Holdings better, we need to consider many other factors. For instance, we've identified 1 warning sign for ENN Energy Holdings that you should be aware of.

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.

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