Key Insights

• Significant insider control over GuangZhou LingWe Technology implies vested interests in company growth
• A total of 2 investors have a majority stake in the company with 53% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of GuangZhou LingWe Technology Co., Ltd. (SZSE:301373), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders as a group endured the highest losses after market cap fell by CN¥381m.

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

What Does The Institutional Ownership Tell Us About GuangZhou LingWe Technology?

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.

GuangZhou LingWe Technology 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. 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 GuangZhou LingWe Technology'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 GuangZhou LingWe Technology. The company's CEO Yingni Hu is the largest shareholder with 47% of shares outstanding. With 6.5% and 5.5% of the shares outstanding respectively, Xinyu Gaoling Investment Partnership Enterprise (Limited Partnership) and Xiangzhong Hu 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 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 a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of GuangZhou LingWe Technology

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.

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 GuangZhou LingWe Technology Co., Ltd.. This gives them effective control of the company. So they have a CN¥1.5b stake in this CN¥2.7b business. 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 24% stake in GuangZhou LingWe Technology. 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

It seems that Private Companies own 10%, of the GuangZhou LingWe Technology stock. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for GuangZhou LingWe Technology (1 is a bit unpleasant!) that you should be aware of before investing here.

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.