Key Insights

• The considerable ownership by private companies in Nexchip Semiconductor indicates that they collectively have a greater say in management and business strategy
• 62% of the business is held by the top 3 shareholders
• Institutional ownership in Nexchip Semiconductor is 17%

To get a sense of who is truly in control of Nexchip Semiconductor Corporation (SHSE:688249), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 48% ownership. 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 5.9% gain.

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

What Does The Institutional Ownership Tell Us About Nexchip Semiconductor?

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.

Nexchip Semiconductor already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Nexchip Semiconductor's historic earnings and revenue below, but keep in mind there's always more to the story.

Nexchip Semiconductor is not owned by hedge funds. Hefei Construction Investment Holding (Group) Co., Ltd. is currently the company's largest shareholder with 24% of shares outstanding. For context, the second largest shareholder holds about 21% of the shares outstanding, followed by an ownership of 17% by the third-largest shareholder.

After doing some more digging, we found that the top 3 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 Nexchip Semiconductor

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. 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 data suggests that insiders own under 1% of Nexchip Semiconductor Corporation in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥13m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 18% 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 Equity Ownership

With an ownership of 17%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 48%, of the Nexchip Semiconductor stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Nexchip Semiconductor (of which 1 is significant!) you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.