Private equity firms invested in MicroTech Medical (Hangzhou) Co., Ltd. (HKG:2235) copped the brunt of last week's HK$272m market cap decline

Key Insights

• The considerable ownership by private equity firms in MicroTech Medical (Hangzhou) indicates that they collectively have a greater say in management and business strategy
• The top 5 shareholders own 55% of the company
• Recent purchases by insiders

A look at the shareholders of MicroTech Medical (Hangzhou) Co., Ltd. (HKG:2235) can tell us which group is most powerful. The group holding the most number of shares in the company, around 35% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders, who own 26% shares weren’t spared from last week’s HK$272m market cap drop, private equity firms as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about MicroTech Medical (Hangzhou).

View our latest analysis for MicroTech Medical (Hangzhou)

What Does The Institutional Ownership Tell Us About MicroTech Medical (Hangzhou)?

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.

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

MicroTech Medical (Hangzhou) is not owned by hedge funds. With a 25% stake, CEO Pan Zheng is the largest shareholder. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

Our research also brought to light the fact that roughly 55% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. 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 MicroTech Medical (Hangzhou)

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 information suggests that insiders maintain a significant holding in MicroTech Medical (Hangzhou) Co., Ltd.. Insiders own HK$490m worth of shares in the HK$1.9b company. 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 24% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 35%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.