Key Insights

• Significantly high institutional ownership implies Greentown China Holdings' stock price is sensitive to their trading actions
• 50% of the business is held by the top 2 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Greentown China Holdings Limited (HKG:3900) should be aware of the most powerful shareholder groups. With 35% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to HK$13b last week after a 7.4% drop in the share price. The recent loss, which adds to a one-year loss of 47% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell Greentown China Holdings, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Greentown China Holdings.

What Does The Institutional Ownership Tell Us About Greentown China Holdings?

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.

Greentown China Holdings 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Greentown China Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Greentown China Holdings. The company's largest shareholder is China Communications Construction Group (Ltd.), with ownership of 28%. With 22% and 4.7% of the shares outstanding respectively, The Wharf (Holdings) Limited and Hong Kong Xinhu Investment Co., Limited are the second and third largest shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Greentown China Holdings

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Greentown China Holdings Limited. 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$597m 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

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Greentown China Holdings. 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 28%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Greentown China Holdings .

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.