Key Insights

• Significant control over Landfar Bio-medicine by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 5 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Landfar Bio-medicine Co., Ltd (SZSE:000504), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 41% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private equity firms collectively scored the highest last week as the company hit CN¥2.6b market cap following a 17% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Landfar Bio-medicine.

What Does The Institutional Ownership Tell Us About Landfar Bio-medicine?

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.

Landfar Bio-medicine already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Landfar Bio-medicine's historic earnings and revenue below, but keep in mind there's always more to the story.

Landfar Bio-medicine is not owned by hedge funds. Hunan Caixin Venture Capital Co. Ltd is currently the largest shareholder, with 30% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Landfar Bio-medicine

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.

We can see that insiders own shares in Landfar Bio-medicine Co., Ltd. As individuals, the insiders collectively own CN¥45m worth of the CN¥2.6b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Landfar Bio-medicine. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 41% stake in Landfar Bio-medicine. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 12%, of the Landfar Bio-medicine 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Landfar Bio-medicine better, we need to consider many other factors. For instance, we've identified 3 warning signs for Landfar Bio-medicine (1 is a bit unpleasant) that you should be aware of.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.