Key Insights

• Significant control over Shanxi Huhua Group by individual investors implies that the general public has more power to influence management and governance-related decisions
• 57% of the business is held by the top 3 shareholders
• 33% of Shanxi Huhua Group is held by insiders

To get a sense of who is truly in control of Shanxi Huhua Group Co., Ltd. (SZSE:003002), it is important to understand the ownership structure of the business. With 34% stake, individual investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 8.4% increase in the stock price last week, individual investors profited the most, but insiders who own 33% stock also stood to gain from the increase.

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

What Does The Institutional Ownership Tell Us About Shanxi Huhua Group?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Shanxi Huhua Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Shanxi Huhua Group's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Shanxi Huhua Group. Changzhi Fangyuan Investment Co., Ltd. is currently the company's largest shareholder with 27% of shares outstanding. For context, the second largest shareholder holds about 21% of the shares outstanding, followed by an ownership of 10.0% by the third-largest shareholder. Dong Qin, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Shanxi Huhua Group

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 maintain a significant holding in Shanxi Huhua Group Co., Ltd.. It has a market capitalization of just CN¥4.9b, and insiders have CN¥1.6b worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanxi Huhua Group. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

Our data indicates that Private Companies hold 27%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Shanxi Huhua Group that you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free 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.