Key Insights

• Significant control over Guangdong Decro Film New Materials by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 9 shareholders own 50% of the company
• 11% of Guangdong Decro Film New Materials is held by insiders

To get a sense of who is truly in control of Guangdong Decro Film New Materials Co., Ltd. (SZSE:001378), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to CN¥3.2b last week, individual investors would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Guangdong Decro Film New Materials.

What Does The Lack Of Institutional Ownership Tell Us About Guangdong Decro Film New Materials?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Guangdong Decro Film New Materials' earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

We note that hedge funds don't have a meaningful investment in Guangdong Decro Film New Materials. The company's largest shareholder is Guangdong Decro Group Co., Ltd., with ownership of 38%. Weiman Luo is the second largest shareholder owning 5.3% of common stock, and Jiahui Xie holds about 2.5% of the company stock. Note that the second and third-largest shareholders are also Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

We did some more digging and found that 9 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Guangdong Decro Film New Materials

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 most recent data indicates that insiders own a reasonable proportion of Guangdong Decro Film New Materials Co., Ltd.. Insiders have a CN¥366m stake in this CN¥3.2b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 50% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Guangdong Decro Film New Materials. 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 38%, of the Guangdong Decro Film New Materials stock. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Guangdong Decro Film New Materials better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangdong Decro Film New Materials (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.