The share price of Guangzhou Automobile Group Co., Ltd. (HKG:2238) fell 3.4% last week; private companies would not be happy

To get an idea of ​​who really controls Guangzhou Automobile Group Co., Ltd. (HKG:2238), it is important to understand the ownership structure of the business. We can see that private companies hold the lion’s share of the company with 56% ownership. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

As a result, private companies as a group suffered the highest losses last week after the market capitalization fell by HK$2.5 billion.

Let’s dive deeper into each type of owner in Guangzhou Automobile Group, starting with the table below.

Before looking at the breakdown of owners, note that our analysis indicates that 2238 is potentially undervalued!

SEHK: 2238 Ownership Breakdown August 24, 2022

What does institutional ownership tell us about the Guangzhou Automotive Group?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. They therefore generally consider buying larger companies that are included in the relevant benchmark.

We can see that Guangzhou Automobile Group has institutional investors; and they own a good part of the shares of the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see Guangzhou Automobile Group’s historic earnings and revenue below, but keep in mind there’s always more to tell.

earnings-and-revenue-growth
SEHK: 2238 Earnings and Revenue Growth Aug 24, 2022

Guangzhou Automobile Group is not owned by hedge funds. Our data shows that Guangzhou Automobile Industry Group Co. Ltd. is the main shareholder with 53% of the outstanding shares. This implies that they have majority control over the future of the company. For context, the second-largest shareholder owns approximately 3.8% of the outstanding shares, followed by 2.4% ownership by the third-largest shareholder.

While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. A number of analysts cover the stock, so you can look at growth forecasts quite easily.

Guangzhou Automotive Group Insider Ownership

The definition of company insiders can be subjective and varies from jurisdiction to jurisdiction. Our data reflects individual insiders, capturing at least board members. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.

I generally consider insider ownership to be a good thing. However, there are times when it is more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of Guangzhou Automobile Group Co., Ltd. But they may have an indirect interest through a corporate structure that we have not noted. It’s a very big company, so it would be surprising to see insiders owning much of the company. Although their stake is less than 1%, we can see that the board members collectively own HK$405 million worth of shares (at current prices). It’s good to see board members owning stock, but it can be helpful to check whether those insiders have bought.

General public property

With a 24% stake, the general public, consisting mainly of individual investors, has some influence over Guangzhou Automobile Group. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.

Private Company Ownership

It seems that private companies hold 56% of the shares of the Guangzhou Automobile Group. It might be worth exploring this further. If related parties, such as insiders, have an interest in any of these private companies, this must be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next steps:

It is always useful to think about the different groups that own shares in a company. But to better understand Guangzhou Automobile Group, we need to consider many other factors. Example: we have identified 2 warning signs for Guangzhou Automobile Group you should be aware, and one of them is concerning.

If you prefer to find out what analysts are predicting in terms of future growth, don’t miss this free analyst forecast report.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Karen J. Nelson