Key Insights

• The considerable ownership by retail investors in Newborn Town indicates that they collectively have a greater say in management and business strategy
• The top 13 shareholders own 45% of the company
• 35% of Newborn Town is held by insiders

To get a sense of who is truly in control of Newborn Town Inc. (HKG:9911), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 12% decrease in the stock price last week, retail investors suffered the most losses, but insiders who own 35% stock also took a hit.

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

What Does The Institutional Ownership Tell Us About Newborn Town?

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.

Institutions have a very small stake in Newborn Town. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

Hedge funds don't have many shares in Newborn Town. Our data suggests that Chunhe Liu, who is also the company's Top Key Executive, holds the most number of shares at 20%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Xinming Wang is the second largest shareholder owning 8.6% of common stock, and Phoenix Auspicious FinTech Investment L.P holds about 6.9% of the company stock. Additionally, the company's CEO Ping Li directly holds 6.3% of the total shares outstanding.

A deeper look at our ownership data shows that the top 13 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Newborn Town

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 Newborn Town Inc.. It has a market capitalization of just HK$3.6b, and insiders have HK$1.3b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 55% of Newborn Town shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

Our data indicates that Private Companies hold 6.9%, 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:

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. Take risks for example - Newborn Town has 1 warning sign we think you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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