Key Insights

• Significant insider control over Guangzhou Tongda Auto Electric implies vested interests in company growth
• A total of 2 investors have a majority stake in the company with 63% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Guangzhou Tongda Auto Electric Co., Ltd (SHSE:603390) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 65% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 15% decline in share price, insiders suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Guangzhou Tongda Auto Electric.

What Does The Institutional Ownership Tell Us About Guangzhou Tongda Auto Electric?

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.

Institutions have a very small stake in Guangzhou Tongda Auto Electric. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in Guangzhou Tongda Auto Electric. The company's CEO Yingbiao Xing is the largest shareholder with 34% of shares outstanding. In comparison, the second and third largest shareholders hold about 29% and 0.9% of the stock.

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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Guangzhou Tongda Auto Electric

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our information suggests that insiders own more than half of Guangzhou Tongda Auto Electric Co., Ltd. This gives them effective control of the company. That means they own CN¥2.3b worth of shares in the CN¥3.4b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Guangzhou Tongda Auto Electric. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Guangzhou Tongda Auto Electric (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.