Key Insights

• Significant control over First Shanghai Investments by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 53% of the company
• Recent purchases by insiders

If you want to know who really controls First Shanghai Investments Limited (HKG:227), then you'll have to look at the makeup of its share registry. With 41% stake, private equity firms possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private equity firms were the biggest beneficiaries of last week's 400% gain.

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

What Does The Lack Of Institutional Ownership Tell Us About First Shanghai Investments?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. 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. First Shanghai Investments might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

First Shanghai Investments is not owned by hedge funds. Our data shows that China Assets (Holdings) Limited is the largest shareholder with 41% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 5.5% by the third-largest shareholder. Yuen Yat Lo, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of First Shanghai Investments

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. 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.

It seems insiders own a significant proportion of First Shanghai Investments Limited. It has a market capitalization of just HK$1.5b, and insiders have HK$293m 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-- including retail investors -- own 39% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With a stake of 41%, private equity firms could influence the First Shanghai Investments board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand First Shanghai Investments better, we need to consider many other factors. For example, we've discovered 3 warning signs for First Shanghai Investments (1 is a bit unpleasant!) that you should be aware of before investing here.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.