Chiho Environmental Group Limited’s (HKG:976) market cap surged HK$72m last week, private equity firms who have a lot riding on the company were rewarded

Key Insights

• Significant control over Chiho Environmental Group by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is USUM Investment Group Co., Ltd. with a 61% stake
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Chiho Environmental Group Limited (HKG:976), then you’ll have to look at the makeup of its share registry. We can see that private equity firms own the lion’s share in the company with 61% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private equity firms benefitted the most after the company’s market cap rose by HK$72m last week.

Let’s take a closer look to see what the different types of shareholders can tell us about Chiho Environmental Group.

View our latest analysis for Chiho Environmental Group

What Does The Lack Of Institutional Ownership Tell Us About Chiho Environmental Group?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it’s always possible that professional investors are avoiding a company because they don’t think it’s the best place for their money. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Chiho Environmental Group, for yourself, below.

Chiho Environmental Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is USUM Investment Group Co., Ltd. with 61% of shares outstanding. This implies that they have majority interest control of the future of the company. In comparison, the second and third largest shareholders hold about 8.9% and 0.4% of the stock.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Chiho Environmental 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in Chiho Environmental Group Limited. In their own names, insiders own HK$71m worth of stock in the HK$795m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Chiho Environmental Group. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 61%, private equity firms could influence the Chiho Environmental Group board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Chiho Environmental Group you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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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.