Key Insights

• Significant control over Lianlian DigiTech by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 50% of the company
• Insider ownership in Lianlian DigiTech is 20%

A look at the shareholders of Lianlian DigiTech Co., Ltd. (HKG:2598) can tell us which group is most powerful. With 35% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While private companies were the group that reaped the most benefits after last week's 6.6% price gain, institutions also received a 23% cut.

Let's delve deeper into each type of owner of Lianlian DigiTech, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Lianlian DigiTech?

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 Lianlian DigiTech does have institutional investors; and they hold a good portion of the company's stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Lianlian DigiTech's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Lianlian DigiTech. Our data shows that Hangzhou Chuanglianzhixin Investment L.P. is the largest shareholder with 16% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 8.6% of the stock. Zhengyu Zhang, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

Our research also brought to light the fact that roughly 50% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. 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 Lianlian DigiTech

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Lianlian DigiTech Co., Ltd.. It is very interesting to see that insiders have a meaningful HK$2.0b stake in this HK$10.0b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lianlian DigiTech. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 5.6% stake in Lianlian DigiTech. 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 35%, 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:

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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.