Key Insights

• Significant insider control over Shanghai Luoman Technologies implies vested interests in company growth
• 54% of the business is held by the top 5 shareholders
• Institutional ownership in Shanghai Luoman Technologies is 23%

If you want to know who really controls Shanghai Luoman Technologies Inc. (SHSE:605289), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 30% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 13% decline in share price, insiders suffered the most losses.

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

What Does The Institutional Ownership Tell Us About Shanghai Luoman Technologies?

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.

As you can see, institutional investors have a fair amount of stake in Shanghai Luoman Technologies. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Luoman Technologies' historic earnings and revenue below, but keep in mind there's always more to the story.

Shanghai Luoman Technologies is not owned by hedge funds. Jianming Sun is currently the largest shareholder, with 18% of shares outstanding. For context, the second largest shareholder holds about 17% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder. Kaijun Sun, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Shanghai Luoman Technologies

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Shanghai Luoman Technologies Inc.. Insiders have a CN¥875m stake in this CN¥2.9b business. 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 24% stake in Shanghai Luoman Technologies. 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

It seems that Private Companies own 23%, of the Shanghai Luoman Technologies stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Shanghai Luoman Technologies 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.