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After Buying Recently, China Risun Group Limited (HKG:1907) Insiders Must Be Dismayed to See the Company's Market Cap Drop to HK$13b

Simply Wall St ·  09/13 08:55

Every investor in China Risun Group Limited (HKG:1907) should be aware of the most powerful shareholder groups. We can see that individual insiders own the lion's share in the company with 71% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

It's interesting to note that insiders have been buying shares recently. So the news of stock price falling by 4.5% is not something they might have been expecting soon after purchasing shares.

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

See our latest analysis for China Risun Group

ownership-breakdownSEHK:1907 Ownership Breakdown September 13th 2022

What Does The Institutional Ownership Tell Us About China Risun Group?

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.

Less than 5% of China Risun Group is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. 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.

earnings-and-revenue-growthSEHK:1907 Earnings and Revenue Growth September 13th 2022

China Risun Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Xuegang Yang with 71% of shares outstanding. With such a huge stake, we infer that they have significant control of the future of the company. It's usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider with such skin in the game. With 2.2% and 0.6% of the shares outstanding respectively, GF Fund Management Co., Ltd. and Norges Bank Investment Management are the second and third largest shareholders.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of China Risun 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. 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 information suggests that insiders own more than half of China Risun Group Limited. This gives them effective control of the company. Insiders own HK$9.2b worth of shares in the HK$13b company. That's extraordinary! Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Risun Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with China Risun Group (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

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