Key Insights

• Insiders appear to have a vested interest in Wuxi Honghui New Materials Technology's growth, as seen by their sizeable ownership
• 53% of the company is held by a single shareholder (Hong Wei Xiang)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Wuxi Honghui New Materials Technology Co., Ltd. (SZSE:002802), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders as a group endured the highest losses after market cap fell by CN¥400m.

Let's delve deeper into each type of owner of Wuxi Honghui New Materials Technology, beginning with the chart below.

What Does The Lack Of Institutional Ownership Tell Us About Wuxi Honghui New Materials Technology?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Wuxi Honghui New Materials Technology, for yourself, below.

Wuxi Honghui New Materials Technology is not owned by hedge funds. Our data shows that Hong Wei Xiang is the largest shareholder with 53% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Wuxi Honghui New Materials Technology Co., Ltd., ESOP is the second largest shareholder owning 1.6% of common stock, and Jian Jun Sun holds about 0.5% of the company stock.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Wuxi Honghui New Materials Technology

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.

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 information suggests that insiders own more than half of Wuxi Honghui New Materials Technology Co., Ltd.. This gives them effective control of the company. So they have a CN¥929m stake in this CN¥1.7b business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 43% stake in Wuxi Honghui New Materials Technology. 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.

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 3 warning signs with Wuxi Honghui New Materials Technology (at least 1 which makes us a bit uncomfortable) , 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.