U.S. Markets close in 6 hrs 5 mins

Could The Sinopec Shanghai Petrochemical Company Limited (HKG:338) Ownership Structure Tell Us Something Useful?

Simply Wall St

If you want to know who really controls Sinopec Shanghai Petrochemical Company Limited (HKG:338), then you’ll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

Sinopec Shanghai Petrochemical has a market capitalization of HK$61b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below below, we can see that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about 338.

See our latest analysis for Sinopec Shanghai Petrochemical

SEHK:338 Ownership Summary, March 5th 2019

What Does The Institutional Ownership Tell Us About Sinopec Shanghai Petrochemical?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Sinopec Shanghai Petrochemical already has institutions on the share registry. Indeed, they own 23% of the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Sinopec Shanghai Petrochemical’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:338 Income Statement, March 5th 2019

We note that hedge funds don’t have a meaningful investment in Sinopec Shanghai Petrochemical. 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 Sinopec Shanghai Petrochemical

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. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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.

I can report that insiders do own shares in Sinopec Shanghai Petrochemical Company Limited. This is a big company, so it is good to see this level of alignment. Insiders own HK$1.2b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 24% stake in 338. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 51%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.