Key Insights

• Significant control over Shenzhen Honor Electronic by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 59% of the company
• Insider ownership in Shenzhen Honor Electronic is 29%

To get a sense of who is truly in control of Shenzhen Honor Electronic Co., Ltd. (SZSE:300870), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week's 25% gain.

Let's delve deeper into each type of owner of Shenzhen Honor Electronic, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Shenzhen Honor Electronic?

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.

We can see that Shenzhen Honor Electronic does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Shenzhen Honor Electronic'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 Shenzhen Honor Electronic. Looking at our data, we can see that the largest shareholder is the CEO Heqiu Wang with 29% of shares outstanding. In comparison, the second and third largest shareholders hold about 29% and 3.7% of the stock.

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.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Shenzhen Honor Electronic

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 most recent data indicates that insiders own a reasonable proportion of Shenzhen Honor Electronic Co., Ltd.. Insiders own CN¥1.4b worth of shares in the CN¥4.9b 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

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shenzhen Honor Electronic. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 34%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen Honor Electronic better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Shenzhen Honor Electronic 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.