Key Insights

• Significant insider control over GKG Precision Machine implies vested interests in company growth
• 59% of the business is held by the top 2 shareholders
• 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 GKG Precision Machine Co., Ltd. (SZSE:301338), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by CN¥393m last week.

In the chart below, we zoom in on the different ownership groups of GKG Precision Machine.

What Does The Institutional Ownership Tell Us About GKG Precision Machine?

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.

As you can see, institutional investors have a fair amount of stake in GKG Precision Machine. 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 GKG Precision Machine'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 GKG Precision Machine. The company's largest shareholder is Guoliang Qiu, with ownership of 36%. With 23% and 6.6% of the shares outstanding respectively, Xiaoyun Peng and Yujiang County Kaige Investment Management Center (Limited Partnership) are the second and third largest shareholders.

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 GKG Precision Machine

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.

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 information suggests that insiders own more than half of GKG Precision Machine Co., Ltd.. This gives them effective control of the company. Given it has a market cap of CN¥3.4b, that means they have CN¥2.0b worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. 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 22% stake in GKG Precision Machine. 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 9.2%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand GKG Precision Machine better, we need to consider many other factors. Be aware that GKG Precision Machine is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

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.