Key Insights

• The considerable ownership by retail investors in Huafon Microfibre (Shanghai) indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 41% of the company
• Insiders own 24% of Huafon Microfibre (Shanghai)

To get a sense of who is truly in control of Huafon Microfibre (Shanghai) Co., Ltd. (SZSE:300180), 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 59% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While the holdings of retail investors took a hit after last week's 6.8% price drop, insiders with their 24% also suffered.

In the chart below, we zoom in on the different ownership groups of Huafon Microfibre (Shanghai).

What Does The Institutional Ownership Tell Us About Huafon Microfibre (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.

Huafon Microfibre (Shanghai) 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 Huafon Microfibre (Shanghai)'s earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Huafon Microfibre (Shanghai). Huafon Group Co., Ltd. is currently the largest shareholder, with 9.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.0% and 4.3%, of the shares outstanding, respectively. In addition, we found that Wei Dong Duan, the CEO has 1.2% of the shares allocated to their name.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Huafon Microfibre (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.

It seems insiders own a significant proportion of Huafon Microfibre (Shanghai) Co., Ltd.. Insiders own CN¥1.5b worth of shares in the CN¥6.5b 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 59% of Huafon Microfibre (Shanghai) shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 9.1%, of the Huafon Microfibre (Shanghai) stock. 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. Be aware that Huafon Microfibre (Shanghai) is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com