In this analysis, my focus will be on developing a perspective on Zhejiang RuiYuan Intelligent Control Technology Company Limited’s (SEHK:8249) latest ownership structure, a less discussed, but important factor. Ownership structure of a company has been found to affect share performance over time. 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 8249’s shareholder registry. All data provided is as of the most recent financial year end.
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Institutional Ownership
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 5.70%, 8249 doesn’t seem too exposed to higher volatility resulting from institutional trading. Stocks with low coverage such as 8249, attracts renowned investor Peter Lynch, who has benefited from the momentum of institutions buying into a stock as it gained popularity.
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. With 9.45% ownership, 8249 insiders is an important ownership type. This level of ownership indicates closely aligned interests of shareholders and management. I will also like to check what insiders have been doing recently with their holdings. 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
The general public holds a substantial 20.32% stake in 8249, making it a highly popular stock among retail investors. 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 8249 should consider are private companies, with a stake of 64.53%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence 8249’s business strategy. Thus, investors should dig deeper into 8249’s business relations with these companies and how it can affect shareholder returns in the long-term.