Key Insights

• The considerable ownership by private equity firms in Daoming Optics&ChemicalLtd indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 2 shareholders
• Insider ownership in Daoming Optics&ChemicalLtd is 21%

To get a sense of who is truly in control of Daoming Optics&Chemical Co.,Ltd (SZSE:002632), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 40% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms were the biggest beneficiaries of last week's 8.0% gain.

In the chart below, we zoom in on the different ownership groups of Daoming Optics&ChemicalLtd.

What Does The Institutional Ownership Tell Us About Daoming Optics&ChemicalLtd?

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.

Institutions have a very small stake in Daoming Optics&ChemicalLtd. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Daoming Optics&ChemicalLtd. Our data shows that Zhejiang Daoming Investment Co., Ltd. is the largest shareholder with 40% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 6.7%, of the shares outstanding, respectively. Note that the second and third-largest shareholders are also Chief Executive Officer and Vice Chairman, respectively, meaning that the company's top shareholders are insiders.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Daoming Optics&ChemicalLtd

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

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 most recent data indicates that insiders own a reasonable proportion of Daoming Optics&Chemical Co.,Ltd. Insiders have a CN¥1.3b stake in this CN¥6.3b business. 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 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Daoming Optics&ChemicalLtd. 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 Equity Ownership

With an ownership of 40%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Daoming Optics&ChemicalLtd better, we need to consider many other factors. Be aware that Daoming Optics&ChemicalLtd is showing 2 warning signs in our investment analysis , you should know about...

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.