In this analysis, my focus will be on developing a perspective on AVIC Joy Holdings (HK) Limited’s (SEHK:260) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at 260’s shareholder registry.

View our latest analysis for AVIC Joy Holdings (HK)

Institutional Ownership

In 260’s case, institutional ownership stands at 19.77%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. In the case of 260, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into 260’s ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 260 insiders hold a minor stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.

General Public Ownership

A big stake of 65.42% in 260 is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Another group of owners that a potential investor in 260 should consider are private companies, with a stake of 14.79%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in 260, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.