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Institutional Owners May Consider Drastic Measures as Kingdee International Software Group Company Limited's (HKG:268) Recent HK$2.4b Drop Adds to Long-term Losses

Simply Wall St ·  {{timeTz}}

If you want to know who really controls Kingdee International Software Group Company Limited (HKG:268), then you'll have to look at the makeup of its share registry. With 56% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 5.7% last week. The recent loss, which adds to a one-year loss of 53% for stockholders, may not sit well with this group of investors. Often called "market makers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Kingdee International Software Group's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Kingdee International Software Group.

View our latest analysis for Kingdee International Software Group

ownership-breakdownSEHK:268 Ownership Breakdown September 26th 2022

What Does The Institutional Ownership Tell Us About Kingdee International Software 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.

As you can see, institutional investors have a fair amount of stake in Kingdee International Software Group. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Kingdee International Software Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growthSEHK:268 Earnings and Revenue Growth September 26th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Kingdee International Software Group. Looking at our data, we can see that the largest shareholder is the CEO Shao Chun Xu with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.1% and 6.9%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Kingdee International Software Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Kingdee International Software Group Company Limited. It is very interesting to see that insiders have a meaningful HK$8.1b stake in this HK$40b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Kingdee International Software Group. 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.

Public Company Ownership

It appears to us that public companies own 5.0% of Kingdee International Software Group. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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