Key Insights

• Shenzhen Sunmoon Microelectronics' significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 2 shareholders own 54% of the company
• 18% of Shenzhen Sunmoon Microelectronics is held by insiders

To get a sense of who is truly in control of Shenzhen Sunmoon Microelectronics Co., Ltd (SHSE:688699), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 42% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private companies benefitted the most after the company's market cap rose by CN¥419m last week.

In the chart below, we zoom in on the different ownership groups of Shenzhen Sunmoon Microelectronics.

What Does The Institutional Ownership Tell Us About Shenzhen Sunmoon Microelectronics?

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.

We can see that Shenzhen Sunmoon Microelectronics 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. 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 Shenzhen Sunmoon Microelectronics' historic earnings and revenue below, but keep in mind there's always more to the story.

Shenzhen Sunmoon Microelectronics is not owned by hedge funds. The company's largest shareholder is Shenzhen Sunmoon Technology Co., Ltd., with ownership of 42%. With 12% and 6.9% of the shares outstanding respectively, Lekang Wang and Shenzhen Qianhai Bopu Asset Management Co., Ltd. are the second and third largest shareholders. Additionally, the company's CEO Zhaohua Li directly holds 0.9% of the total shares outstanding.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 54% stake.

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 Shenzhen Sunmoon Microelectronics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Shenzhen Sunmoon Microelectronics Co., Ltd. It has a market capitalization of just CN¥2.7b, and insiders have CN¥476m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Shenzhen Sunmoon Microelectronics. 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 Company Ownership

Our data indicates that Private Companies hold 42%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen Sunmoon Microelectronics better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shenzhen Sunmoon Microelectronics (of which 1 doesn't sit too well with us!) you should know about.

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.