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After the recent decline, Texhong Textile Group Limited (HKG:2678) Top Key Executive Tianzhu Hong’s holdings have lost 13% of their value


If you want to know who really controls Texhong Textile Group Limited (HKG:2678), then you’ll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to HK$5.4b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Texhong Textile Group.

If you’re not interested in researching 2678’s ownership structure, we have a free list of interesting investing ideas to potentially inspire your next investment!

ownership-breakdown
SEHK:2678 Ownership Breakdown September 24th 2022

What Does The Institutional Ownership Tell Us About Texhong Textile Group?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Less than 5% of Texhong Textile Group is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

earnings-and-revenue-growth
SEHK:2678 Earnings and Revenue Growth September 24th 2022

Texhong Textile Group is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Texhong Textile Group’s case, its Top Key Executive, Tianzhu Hong, is the largest shareholder, holding 43% of shares outstanding. In comparison, the second and third largest shareholders hold about 17% and 7.4% of the stock. Interestingly, the third-largest shareholder, Yongxiang Zhu is also a Vice Chairman, again, indicating strong insider ownership amongst the company’s top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company’s shares, implying that they have considerable power to influence the company’s decisions.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. 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 Texhong Textile Group

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems that insiders own more than half the Texhong Textile Group Limited stock. This gives them a lot of power. So they have a HK$2.8b stake in this HK$5.4b business. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Texhong Textile Group. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 24%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Be aware that Texhong Textile Group is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable…

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

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.

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