HUTCHMED (China) Limited's (LON:HCM) last week's 6.4% decline must have disappointed private equity firms who have a significant stake

Key Insights

• The considerable ownership by private equity firms in HUTCHMED (China) indicates that they collectively have a greater say in management and business strategy

• A total of 8 investors have a majority stake in the company with 51% ownership

• 28% of HUTCHMED (China) is held by Institutions

A look at the shareholders of HUTCHMED (China) Limited (LON:HCM) can tell us which group is most powerful. The group holding the most number of shares in the company, around 39% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private equity firms endured the biggest losses as the stock fell by 6.4%.

Let's delve deeper into each type of owner of HUTCHMED (China), beginning with the chart below.

See our latest analysis for HUTCHMED (China)

ownership-breakdown

What Does The Institutional Ownership Tell Us About HUTCHMED (China)?

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.

HUTCHMED (China) already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 HUTCHMED (China)'s historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth

Hedge funds don't have many shares in HUTCHMED (China). The company's largest shareholder is Hutchison Whampoa (China) Limited, with ownership of 39%. With 2.5% and 2.3% of the shares outstanding respectively, M&G Securities Limited and General Atlantic Service Company, L.P. are the second and third largest shareholders.

We did some more digging and found that 8 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of HUTCHMED (China)

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our most recent data indicates that insiders own some shares in HUTCHMED (China) Limited. The insiders have a meaningful stake worth UK£29m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over HUTCHMED (China). 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 Equity Ownership

With a stake of 39%, private equity firms could influence the HUTCHMED (China) board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand HUTCHMED (China) better, we need to consider many other factors. For instance, we've identified 1 warning sign for HUTCHMED (China) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com