In this article, I’m going to take a look at Wuling Motors Holdings Limited’s (HKG:305) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. 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 to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, it is beneficial for us to examine 305’s ownership structure in more detail.
View our latest analysis for Wuling Motors Holdings
Insider Ownership
Insiders form a 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. 305 insiders hold a significant stake of 14.1% 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). Another aspect of insider ownership is to learn about their recent transactions. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
A big stake of 25.2% in 305 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 important group of owners for potential investors in 305 are private companies that hold a stake of 60.6% in 305. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect 305’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.