Key Insights

• Significant control over Hunan Warrant PharmaceuticalLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• 56% of the business is held by the top 2 shareholders
• Insider ownership in Hunan Warrant PharmaceuticalLtd is 19%

Every investor in Hunan Warrant Pharmaceutical Co.,Ltd (SHSE:688799) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 40% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥431m.

In the chart below, we zoom in on the different ownership groups of Hunan Warrant PharmaceuticalLtd.

What Does The Institutional Ownership Tell Us About Hunan Warrant PharmaceuticalLtd?

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.

Hunan Warrant PharmaceuticalLtd 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 Hunan Warrant PharmaceuticalLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Hunan Warrant PharmaceuticalLtd. Our data shows that Hunan Warrant Pharmaceutical Investment Partnership Enterprise (Limited Partnership) is the largest shareholder with 40% of shares outstanding. In comparison, the second and third largest shareholders hold about 17% and 2.5% of the stock. Yan Jin, who is the third-largest shareholder, also happens to hold the title of Chairman of Corporate Board.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Hunan Warrant PharmaceuticalLtd

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 information suggests that insiders maintain a significant holding in Hunan Warrant Pharmaceutical Co.,Ltd. It has a market capitalization of just CN¥3.7b, and insiders have CN¥709m worth of shares in their own names. 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

The general public-- including retail investors -- own 30% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 40%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Hunan Warrant PharmaceuticalLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Hunan Warrant PharmaceuticalLtd .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.