Key Insights

• The considerable ownership by private companies in China Everbright indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 59% of the company
• Institutions own 17% of China Everbright

To get a sense of who is truly in control of China Everbright Limited (HKG:165), it is important to understand the ownership structure of the business. With 50% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by HK$489m.

In the chart below, we zoom in on the different ownership groups of China Everbright.

What Does The Institutional Ownership Tell Us About China Everbright?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

China Everbright 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 China Everbright's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in China Everbright. Looking at our data, we can see that the largest shareholder is China Everbright Group Ltd. with 50% of shares outstanding. Citic-Prudential Life Insurance Co., Ltd, Asset Management Arm is the second largest shareholder owning 9.0% of common stock, and UBS Asset Management AG holds about 2.2% of the company stock.

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.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of China Everbright

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.

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 most recent data indicates that insiders own less than 1% of China Everbright Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own HK$1.4m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China Everbright. 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

It seems that Private Companies own 50%, of the China Everbright 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:

It's always worth thinking about the different groups who own shares in a company. But to understand China Everbright better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for China Everbright you should be aware of, and 3 of them don't sit too well with us.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.