Key Insights

• The considerable ownership by private companies in Huadong Medicine indicates that they collectively have a greater say in management and business strategy
• 58% of the business is held by the top 2 shareholders
• Institutional ownership in Huadong Medicine is 12%

If you want to know who really controls Huadong Medicine Co., Ltd (SZSE:000963), 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 58% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

Meanwhile, individual investors make up 30% of the company's shareholders.

In the chart below, we zoom in on the different ownership groups of Huadong Medicine.

What Does The Institutional Ownership Tell Us About Huadong Medicine?

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.

We can see that Huadong Medicine does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Huadong Medicine, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Huadong Medicine. The company's largest shareholder is China Grand Enterprises, Inc., with ownership of 42%. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 1.3% by the third-largest shareholder.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Huadong Medicine

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 information suggests that Huadong Medicine Co., Ltd insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥28m worth of shares. 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

The general public-- including retail investors -- own 30% 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

We can see that Private Companies own 58%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Huadong Medicine better, we need to consider many other factors. For instance, we've identified 1 warning sign for Huadong Medicine that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.