Home Private Equity Private equity firms in CStone Pharmaceuticals (HKG:2616) are its biggest bettors, and...

Private equity firms in CStone Pharmaceuticals (HKG:2616) are its biggest bettors, and their bets paid off as stock gained 9.6% last week


A look at the shareholders of CStone Pharmaceuticals (HKG:2616) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private equity firms benefitted the most after the company’s market cap rose by HK$571m last week.

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

Check out our latest analysis for CStone Pharmaceuticals

SEHK:2616 Ownership Breakdown June 10th 2022

What Does The Institutional Ownership Tell Us About CStone Pharmaceuticals?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that CStone Pharmaceuticals does have institutional investors; and they hold a good portion of the company’s stock. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see CStone Pharmaceuticals’ historic earnings and revenue below, but keep in mind there’s always more to the story.

SEHK:2616 Earnings and Revenue Growth June 10th 2022

CStone Pharmaceuticals is not owned by hedge funds. Our data shows that 6 Dimensions Capital, L.P. is the largest shareholder with 25% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 9.9%, of the shares outstanding, respectively. Furthermore, CEO Ningjun Jiang is the owner of 2.4% of the company’s shares.

Our research also brought to light the fact that roughly 56% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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. 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 CStone Pharmaceuticals

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 report that insiders do own shares in CStone Pharmaceuticals. In their own names, insiders own HK$195m worth of stock in the HK$6.5b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over CStone Pharmaceuticals. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 46% stake in CStone Pharmaceuticals. This suggests they can be influential in key policy decisions. 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.

Public Company Ownership

It appears to us that public companies own 9.9% of CStone Pharmaceuticals. We can’t be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Take risks for example – CStone Pharmaceuticals has 1 warning sign we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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