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Painful Week for Individual Investors Invested in 3SBio Inc. (HKG:1530) After 5.4% Drop, Institutions Also Suffered Losses

Simply Wall St ·  10/23/2023 08:02

Key Insights

  • 3SBio's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
  • 49% of the business is held by the top 25 shareholders
  • Institutional ownership in 3SBio is 26%

If you want to know who really controls 3SBio Inc. (HKG:1530), then you'll have to look at the makeup of its share registry. We can see that individual investors own the lion's share in the company with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 26% came under pressure after market cap dropped to HK$15b last week,individual investors took the most losses.

In the chart below, we zoom in on the different ownership groups of 3SBio.

See our latest analysis for 3SBio

ownership-breakdown
SEHK:1530 Ownership Breakdown October 23rd 2023

What Does The Institutional Ownership Tell Us About 3SBio?

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.

3SBio 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 3SBio's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
SEHK:1530 Earnings and Revenue Growth October 23rd 2023

Hedge funds don't have many shares in 3SBio. Looking at our data, we can see that the largest shareholder is Century Sunshine Limited with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.2% and 3.0% of the stock. In addition, we found that Jing Lou, the CEO has 2.1% of the shares allocated to their name.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 3SBio

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

We can see that insiders own shares in 3SBio Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around HK$998m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 45% stake in the company, and hence can't easily be ignored. 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

We can see that Private Companies own 22%, of the shares on issue. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with 3SBio , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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