Key Insights

• Significant control over Everdisplay Optronics (Shanghai) by private equity firms implies that the general public has more power to influence management and governance-related decisions
• Shanghai Alliance Investment Ltd. owns 58% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Everdisplay Optronics (Shanghai) Co., Ltd. (SHSE:688538) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 71% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private equity firms endured the biggest losses as the stock fell by 3.1%.

Let's delve deeper into each type of owner of Everdisplay Optronics (Shanghai), beginning with the chart below.

What Does The Institutional Ownership Tell Us About Everdisplay Optronics (Shanghai)?

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.

Everdisplay Optronics (Shanghai) already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Everdisplay Optronics (Shanghai)'s earnings history below. Of course, the future is what really matters.

Everdisplay Optronics (Shanghai) is not owned by hedge funds. Shanghai Alliance Investment Ltd. is currently the company's largest shareholder with 58% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 3.1% by the third-largest shareholder.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Everdisplay Optronics (Shanghai)

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 data suggests that insiders own under 1% of Everdisplay Optronics (Shanghai) Co., Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥18m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Everdisplay Optronics (Shanghai). 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 an ownership of 71%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Private Company Ownership

We can see that Private Companies own 3.9%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Everdisplay Optronics (Shanghai) better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Everdisplay Optronics (Shanghai) , 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.