In this analysis, my focus will be on developing a perspective on Huge China Holdings Limited’s (SEHK:428) 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 same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct 428’s shareholder registry. All data provided is as of the most recent financial year end.

See our latest analysis for Huge China Holdings

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. 428 insiders hold a significant stake of 43.19% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.

General Public Ownership

The general public holds a substantial 56.81% stake in 428, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

What this means for you:

A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, if you are building an investment case for 428, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Huge China Holdings’s share price. I highly recommend you to complete your research by taking a look at the following: