Key Insights

• Heilongjiang ZBD Pharmaceutical's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• Heilongjiang Chuangda Group Co., Ltd. owns 50% of the company
• 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 Heilongjiang ZBD Pharmaceutical Co., Ltd. (SHSE:603567), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private equity firms with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private equity firms as a group endured the highest losses last week after market cap fell by CN¥517m.

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

What Does The Institutional Ownership Tell Us About Heilongjiang ZBD Pharmaceutical?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Heilongjiang ZBD Pharmaceutical does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Heilongjiang ZBD Pharmaceutical, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Heilongjiang ZBD Pharmaceutical. Heilongjiang Chuangda Group Co., Ltd. is currently the company's largest shareholder with 50% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 5.9% of the shares outstanding, followed by an ownership of 5.0% by the third-largest shareholder.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Heilongjiang ZBD Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 less than 1% of Heilongjiang ZBD Pharmaceutical Co., Ltd.. But they may have an indirect interest through a corporate structure that we haven't picked up on. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥6.4m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 31% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With an ownership of 55%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 6.2%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Heilongjiang ZBD Pharmaceutical (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.

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