Key Insights

• Dongguan Mentech Optical & Magnetic's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 46% ownership
• 35% of Dongguan Mentech Optical & Magnetic is held by insiders

To get a sense of who is truly in control of Dongguan Mentech Optical & Magnetic Co., Ltd. (SZSE:002902), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders who own 35% came under pressure after market cap dropped to CN¥4.3b last week,retail investors took the most losses.

In the chart below, we zoom in on the different ownership groups of Dongguan Mentech Optical & Magnetic.

What Does The Institutional Ownership Tell Us About Dongguan Mentech Optical & Magnetic?

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.

Dongguan Mentech Optical & Magnetic already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Dongguan Mentech Optical & Magnetic's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Dongguan Mentech Optical & Magnetic. The company's largest shareholder is Dong Yang, with ownership of 32%. With 1.8% and 1.2% of the shares outstanding respectively, Caihong Jiao and China Merchants Securities Asset Management Co., Ltd. are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Dongguan Mentech Optical & Magnetic

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.

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.

It seems insiders own a significant proportion of Dongguan Mentech Optical & Magnetic Co., Ltd.. Insiders own CN¥1.5b worth of shares in the CN¥4.3b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 53% of Dongguan Mentech Optical & Magnetic shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Dongguan Mentech Optical & Magnetic better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Dongguan Mentech Optical & Magnetic you should be aware of, and 1 of them doesn't sit too well with us.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.