Despite recent sales, ZG Group (HKG:6676) insiders own 37% shares but recent downturn may have set them back

Key Insights

• Significant insider control over ZG Group implies vested interests in company growth
• The top 5 shareholders own 53% of the company
• Insiders have sold recently

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

A look at the shareholders of ZG Group (HKG:6676) can tell us which group is most powerful. With 37% stake, individual insiders possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Despite selling some shares recently, insiders control a good portion of the company's stock. As a result, the group bore the brunt of last week’s HK$246m market cap loss.

In the chart below, we zoom in on the different ownership groups of ZG Group.

See our latest analysis for ZG Group

What Does The Institutional Ownership Tell Us About ZG Group?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in ZG Group. 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. 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 ZG Group's historic earnings and revenue below, but keep in mind there's always more to the story.

ZG Group is not owned by hedge funds. Our data shows that Yuan Liu is the largest shareholder with 16% of shares outstanding. Dong Wang is the second largest shareholder owning 15% of common stock, and Beijing Jianshi Hongyuan Investment Management Centre (L.P.) holds about 9.6% of the company stock. Dong Wang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On looking further, we found that 53% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of ZG Group

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. 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 a reasonable proportion of ZG Group. Insiders have a HK$709m stake in this HK$1.9b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 27% stake in ZG Group. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With a stake of 19%, private equity firms could influence the ZG Group board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 9.7%, of the company's shares. 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. Be aware that ZG Group is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.