Key Insights

• The considerable ownership by private companies in Zhende Medical indicates that they collectively have a greater say in management and business strategy
• The largest shareholder of the company is Zhejiang Zhende Holding Co., Ltd. with a 54% stake
• Institutions own 12% of Zhende Medical

To get a sense of who is truly in control of Zhende Medical Co., Ltd. (SHSE:603301), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 54% 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¥583m last week.

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

What Does The Institutional Ownership Tell Us About Zhende Medical?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Zhende Medical 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Zhende Medical, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Zhende Medical. Our data shows that Zhejiang Zhende Holding Co., Ltd. is the largest shareholder with 54% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Zhe Shen is the second largest shareholder owning 3.5% of common stock, and China Merchants Fund Management Company Ltd. holds about 2.0% of the company stock. Additionally, the company's CEO Jianguo Lu directly holds 1.5% of the total shares outstanding.

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 Zhende Medical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Zhende Medical Co., Ltd.. As individuals, the insiders collectively own CN¥319m worth of the CN¥5.9b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zhende Medical. 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 54%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Zhende Medical better, we need to consider many other factors. Be aware that Zhende Medical is showing 1 warning sign in our investment analysis , you should know about...

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.