Key Insights

• Significant control over Shanghai Pharmaceuticals Holding by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 3 shareholders own 54% of the company
• Institutional ownership in Shanghai Pharmaceuticals Holding is 18%

To get a sense of who is truly in control of Shanghai Pharmaceuticals Holding Co., Ltd (SHSE:601607), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 38% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private companies were the biggest beneficiaries of last week's 4.8% gain.

In the chart below, we zoom in on the different ownership groups of Shanghai Pharmaceuticals Holding.

What Does The Institutional Ownership Tell Us About Shanghai Pharmaceuticals Holding?

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.

We can see that Shanghai Pharmaceuticals Holding does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Shanghai Pharmaceuticals Holding, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Shanghai Pharmaceuticals Holding. SIIC Shanghai (Holdings) Corporation Limited is currently the company's largest shareholder with 30% of shares outstanding. With 18% and 6.0% of the shares outstanding respectively, Yunnan Baiyao Group Co.,Ltd and Shanghai Industrial Investment (Holding) Co., Ltd. are the second and third largest shareholders.

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.

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 Shanghai Pharmaceuticals Holding

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.

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 Shanghai Pharmaceuticals Holding Co., Ltd. However, it's possible that insiders might have an indirect interest through a more complex structure. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own CN¥2.1m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 26% stake in Shanghai Pharmaceuticals Holding. 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 38%, of the Shanghai Pharmaceuticals Holding 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.

Public Company Ownership

Public companies currently own 18% of Shanghai Pharmaceuticals Holding stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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 Shanghai Pharmaceuticals Holding , and understanding them should be part of your investment process.

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.

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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.