Key Insights

• Significant control over Guizhou ChitianhuaLtd by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 15 shareholders own 41% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Guizhou Chitianhua Co.,Ltd. (SHSE:600227), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors were the biggest beneficiaries of last week's 16% gain.

Let's take a closer look to see what the different types of shareholders can tell us about Guizhou ChitianhuaLtd.

What Does The Institutional Ownership Tell Us About Guizhou ChitianhuaLtd?

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.

Guizhou ChitianhuaLtd 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 Guizhou ChitianhuaLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

Guizhou ChitianhuaLtd is not owned by hedge funds. Our data shows that Guizhou Yuyang Trade Co., Ltd. is the largest shareholder with 26% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.6% and 5.6% of the stock.

On studying our ownership data, we found that 15 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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

Insider Ownership Of Guizhou ChitianhuaLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our data suggests that insiders own under 1% of Guizhou Chitianhua Co.,Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It seems the board members have no more than CN¥21m worth of shares in the CN¥2.9b company. 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

The general public, who are usually individual investors, hold a substantial 59% stake in Guizhou ChitianhuaLtd, suggesting it is a fairly popular stock. 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.

Private Company Ownership

We can see that Private Companies own 32%, 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 Guizhou ChitianhuaLtd better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Guizhou ChitianhuaLtd (of which 1 makes us a bit uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.