Key Insights

• Significant control over Hengong Precision Equipment by private companies implies that the general public has more power to influence management and governance-related decisions
• 56% of the company is held by a single shareholder (Hebei Jiegong Enterprise Management Co., Ltd.)
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Hengong Precision Equipment Co., Ltd. (SZSE:301261) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 59% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CN¥3.6b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Hengong Precision Equipment.

What Does The Institutional Ownership Tell Us About Hengong Precision Equipment?

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.

Hengong Precision Equipment 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. 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 Hengong Precision Equipment's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Hengong Precision Equipment. Looking at our data, we can see that the largest shareholder is Hebei Jiegong Enterprise Management Co., Ltd. with 56% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 9.0% and 2.3% of the stock. In addition, we found that Zhiyong Wei, the CEO has 0.6% of the shares allocated to their name.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Hengong Precision Equipment

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own less than 1% of Hengong Precision Equipment Co., Ltd.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about CN¥20m worth of stock. This compares to a market capitalization of CN¥3.6b. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hengong Precision Equipment. 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 9.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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

It seems that Private Companies own 59%, of the Hengong Precision Equipment stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Hengong Precision Equipment (including 1 which is concerning) .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.