Key Insights

• Significant control over Huafon ChemicalLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 53% of the company
• Insider ownership in Huafon ChemicalLtd is 22%

Every investor in Huafon Chemical Co.,Ltd (SZSE:002064) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 45% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private companies benefitted the most after the company's market cap rose by CN¥2.9b last week.

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

What Does The Institutional Ownership Tell Us About Huafon ChemicalLtd?

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.

Huafon ChemicalLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 ChemicalLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Huafon ChemicalLtd. Our data shows that Huafon Group Co., Ltd. is the largest shareholder with 45% of shares outstanding. For context, the second largest shareholder holds about 8.0% of the shares outstanding, followed by an ownership of 6.6% by the third-largest shareholder.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Huafon ChemicalLtd

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. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Huafon Chemical Co.,Ltd. It is very interesting to see that insiders have a meaningful CN¥8.0b stake in this CN¥37b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. 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 Company Ownership

Our data indicates that Private Companies hold 45%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Huafon ChemicalLtd has 1 warning sign we think you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.