Key Insights

• Significant insider control over Henan Liliang Diamond implies vested interests in company growth
• A total of 3 investors have a majority stake in the company with 50% ownership
• 10% of Henan Liliang Diamond is held by Institutions

If you want to know who really controls Henan Liliang Diamond Co., Ltd. (SZSE:301071), then you'll have to look at the makeup of its share registry. With 48% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 8.7%.

Let's take a closer look to see what the different types of shareholders can tell us about Henan Liliang Diamond.

What Does The Institutional Ownership Tell Us About Henan Liliang Diamond?

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.

Henan Liliang Diamond already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Henan Liliang Diamond, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Henan Liliang Diamond. The company's CEO Zengming Shao is the largest shareholder with 34% of shares outstanding. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 2.5% by the third-largest shareholder.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Henan Liliang Diamond

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

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 information suggests that insiders maintain a significant holding in Henan Liliang Diamond Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥4.1b stake in this CN¥8.6b 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 39% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Henan Liliang Diamond. 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 3.3%, of the Henan Liliang Diamond 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Henan Liliang Diamond (at least 1 which can't be ignored) , 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.