Key Insights

• The considerable ownership by private companies in Zhejiang Hongchang Electrical Technology indicates that they collectively have a greater say in management and business strategy
• 63% of the business is held by the top 2 shareholders
• Insiders own 30% of Zhejiang Hongchang Electrical Technology

To get a sense of who is truly in control of Zhejiang Hongchang Electrical Technology Co., Ltd. (SZSE:301008), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 40% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

While private companies were the group that reaped the most benefits after last week's 37% price gain, insiders also received a 30% cut.

In the chart below, we zoom in on the different ownership groups of Zhejiang Hongchang Electrical Technology.

What Does The Institutional Ownership Tell Us About Zhejiang Hongchang Electrical Technology?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Zhejiang Hongchang Electrical Technology already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Zhejiang Hongchang Electrical Technology's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Zhejiang Hongchang Electrical Technology. Our data shows that Zhejiang Hongchang Holdings Co., Ltd. is the largest shareholder with 36% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 27% and 3.0%, of the shares outstanding, respectively. Furthermore, CEO Can Lu is the owner of 2.6% of the company's shares.

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 63% stake.

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. 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 Zhejiang Hongchang Electrical Technology

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.

Our most recent data indicates that insiders own a reasonable proportion of Zhejiang Hongchang Electrical Technology Co., Ltd.. It has a market capitalization of just CN¥2.8b, and insiders have CN¥820m 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-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 40%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Zhejiang Hongchang Electrical Technology better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Zhejiang Hongchang Electrical Technology (including 1 which makes us a bit uncomfortable) .

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.