Key Insights

• The considerable ownership by private companies in Shanghai Newtouch Software indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 10 shareholders
• Institutional ownership in Shanghai Newtouch Software is 22%

To get a sense of who is truly in control of Shanghai Newtouch Software Co., Ltd. (SHSE:688590), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 42% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥618m.

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

What Does The Institutional Ownership Tell Us About Shanghai Newtouch Software?

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 Shanghai Newtouch Software. 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. 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 Shanghai Newtouch Software, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Shanghai Newtouch Software. Looking at our data, we can see that the largest shareholder is Shanghai Qianzhi Communication Technology Co., Ltd. with 24% of shares outstanding. Shanghai Zhongjian Management Consulting Co., Ltd. is the second largest shareholder owning 5.2% of common stock, and Fullgoal Fund Management Co. Ltd. holds about 3.3% of the company stock.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Shanghai Newtouch Software

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

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.

Our data suggests that insiders own under 1% of Shanghai Newtouch Software Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It has a market capitalization of just CN¥3.7b, and the board has only CN¥16m worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 36% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 42%, of the shares on issue. 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 6 warning signs for Shanghai Newtouch Software (4 make us uncomfortable!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.