Key Insights

• Significant control over Heilongjiang ZBD Pharmaceutical by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 50% of the company is held by a single shareholder (Heilongjiang Chuangda Group Co., Ltd.)
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Heilongjiang ZBD Pharmaceutical Co., Ltd. (SHSE:603567), 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 55% to be precise, is private equity firms. 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 as a group endured the highest losses last week after market cap fell by CN¥432m.

In the chart below, we zoom in on the different ownership groups of Heilongjiang ZBD Pharmaceutical.

What Does The Institutional Ownership Tell Us About Heilongjiang ZBD Pharmaceutical?

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 Heilongjiang ZBD Pharmaceutical. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Heilongjiang ZBD Pharmaceutical, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Heilongjiang ZBD Pharmaceutical. Heilongjiang Chuangda Group Co., Ltd. is currently the company's largest shareholder with 50% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 5.9% of the shares outstanding, followed by an ownership of 5.0% by the third-largest shareholder.

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 Heilongjiang ZBD Pharmaceutical

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 less than 1% of Heilongjiang ZBD Pharmaceutical Co., Ltd.. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own CN¥7.2m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Heilongjiang ZBD Pharmaceutical. 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

Private equity firms hold a 55% stake in Heilongjiang ZBD Pharmaceutical. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 6.2%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Heilongjiang ZBD Pharmaceutical that you should be aware of.

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.