Key Insights

• Shanghai Chicmax Cosmetic's significant employee share scheme ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 2 investors have a majority stake in the company with 83% ownership
• Insiders have bought recently

To get a sense of who is truly in control of Shanghai Chicmax Cosmetic Co., Ltd. (HKG:2145), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are employee share scheme with 42% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders, who own 40% shares weren't spared from last week's HK$776m market cap drop, employee share scheme as a group suffered the maximum losses

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

What Does The Lack Of Institutional Ownership Tell Us About Shanghai Chicmax Cosmetic?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Shanghai Chicmax Cosmetic's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in Shanghai Chicmax Cosmetic. Shanghai Chicmax Cosmetic Co., Ltd, ESOP is currently the largest shareholder, with 42% of shares outstanding. For context, the second largest shareholder holds about 40% of the shares outstanding, followed by an ownership of 0.2% by the third-largest shareholder. Note that the second and third-largest shareholders are also Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

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 Shanghai Chicmax Cosmetic

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.

It seems insiders own a significant proportion of Shanghai Chicmax Cosmetic Co., Ltd.. Insiders own HK$5.3b worth of shares in the HK$13b company. That's quite meaningful. 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, who are usually individual investors, hold a 17% stake in Shanghai Chicmax Cosmetic. 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.

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. To that end, you should be aware of the 1 warning sign we've spotted with Shanghai Chicmax Cosmetic .

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.