Guan Chao Holdings Limited's (HKG:1872) stock price dropped 12% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in Guan Chao Holdings indicates that they collectively have a greater say in management and business strategy
• A total of 4 investors have a majority stake in the company with 28% ownership
• Insiders own 20% of Guan Chao Holdings

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A look at the shareholders of Guan Chao Holdings Limited (HKG:1872) can tell us which group is most powerful. The group holding the most number of shares in the company, around 60% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 20% shares weren’t spared from last week’s HK$357m market cap drop, retail investors as a group suffered the maximum losses

In the chart below, we zoom in on the different ownership groups of Guan Chao Holdings.

See our latest analysis for Guan Chao Holdings

What Does The Lack Of Institutional Ownership Tell Us About Guan Chao Holdings?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Guan Chao Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

We note that hedge funds don't have a meaningful investment in Guan Chao Holdings. Looking at our data, we can see that the largest shareholder is the CEO Shuay Tarng Tan with 17% of shares outstanding. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 3.9% by the third-largest shareholder.

Our studies suggest that the top 4 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Guan Chao Holdings

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Our most recent data indicates that insiders own a reasonable proportion of Guan Chao Holdings Limited. It has a market capitalization of just HK$2.7b, and insiders have HK$559m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public -- including retail investors -- own 60% of Guan Chao Holdings. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 3.3%, of the Guan Chao Holdings stock. 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:

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. For instance, we've identified 3 warning signs for Guan Chao Holdings that you should be aware of.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.