Key Insights

• Significant control over Shanghai Chemspec by private companies implies that the general public has more power to influence management and governance-related decisions
• 55% of the business is held by the top 3 shareholders
• Institutions own 14% of Shanghai Chemspec

To get a sense of who is truly in control of Shanghai Chemspec Corporation (SHSE:688602), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 48% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, private companies endured the biggest losses as the stock fell by 10%.

Let's delve deeper into each type of owner of Shanghai Chemspec, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Shanghai Chemspec?

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.

Shanghai Chemspec already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Shanghai Chemspec's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Shanghai Chemspec. Ningbo Meishan Bonded Port Area Ouchang Investment Management Co., Ltd. is currently the company's largest shareholder with 35% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 8.8% by the third-largest shareholder.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Chemspec

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanghai Chemspec. 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 8.8% stake in Shanghai Chemspec. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 48%, of the shares on issue. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Shanghai Chemspec (1 can't be ignored) that you should be aware of.

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.