Key Insights

• Significant control over Shanghai Highly (Group) by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 42% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shanghai Highly (Group) Co., Ltd. (SHSE:600619), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 58% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors collectively scored the highest last week as the company hit CN¥5.0b market cap following a 7.8% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Shanghai Highly (Group).

What Does The Institutional Ownership Tell Us About Shanghai Highly (Group)?

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.

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

Shanghai Highly (Group) is not owned by hedge funds. Shanghai Electric Holdings Group Co., Ltd. is currently the largest shareholder, with 27% of shares outstanding. Gree Electric Appliances, Inc. of Zhuhai is the second largest shareholder owning 8.5% of common stock, and Shanghai Guotai Junan Securities Asset Management Co., Ltd. holds about 2.7% of the company stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Shanghai Highly (Group)

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.

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 suggests that insiders own under 1% of Shanghai Highly (Group) Co., Ltd. in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about CN¥12m worth of stock. This compares to a market capitalization of CN¥5.0b. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 58% stake in Shanghai Highly (Group), suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 27%, of the Shanghai Highly (Group) stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

It appears to us that public companies own 8.5% of Shanghai Highly (Group). 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Shanghai Highly (Group) has 1 warning sign we think you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free 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.