The recent drop in market capitalization of HK$643 million is likely to have disappointed insiders invested in The Hongkong and Shanghai Hotels, Limited (HKG: 45)

Every investor in The Hongkong and Shanghai Hotels, Limited (HKG:45) should know the most powerful shareholder groups. And the group that holds the biggest slice of the pie are individual insiders with 57% ownership. In other words, the group faces the maximum upside potential (or downside risk).

And last week, insiders suffered the biggest losses, as the stock fell 5.4%.

Let’s take a closer look at what different types of shareholders can tell us about Hong Kong and Shanghai Hotels.

However, if you prefer to see where opportunities and risks are in the industry of 45you can consult our analysis on the hospitality sector in Hong Kong.

SEHK:45 Ownership Breakdown October 1, 2022

What does institutional ownership tell us about hotels in Hong Kong and Shanghai?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.

Hongkong and Shanghai Hotels already have institutions listed on the share register. Indeed, they hold a respectable stake in 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 the historic revenue and revenue for hotels in Hong Kong and Shanghai below, but keep in mind there’s always more to tell.

earnings-and-revenue-growth
SEHK:45 Earnings and Revenue Growth Oct 1, 2022

Hedge funds don’t have a lot of shares in Hong Kong and Shanghai hotels. Michael David Kadoorie is currently the largest shareholder, with 51% of the outstanding shares. This essentially means that they have considerable influence, if not absolute control, over the future of the company. For context, the second shareholder owns approximately 16% of the outstanding shares, followed by a 5.1% stake by the third shareholder.

While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. As far as we can tell, there’s no analyst coverage of the company, so it’s probably flying under the radar.

Insider ownership of Hong Kong and Shanghai hotels

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.

Most view insider ownership as a positive because it can indicate that the board is well aligned with other shareholders. However, there are times when too much power is concentrated within this group.

Our information suggests that insiders own more than half of The Hongkong and Shanghai Hotels, Limited. This gives them effective control of the business. Insiders hold HK$6.4 billion worth of shares in the HK$11 billion company. It’s extraordinary ! Most would say this is a positive, showing strong alignment with shareholders. You can click here to see if they have sold their stake.

General public property

With a 21% stake, the general public, consisting mainly of individual investors, has some influence over hotels in Hong Kong and Shanghai. Although this group may not necessarily make the decisions, they can certainly have a real influence on the way the business is run.

Ownership of a public company

It appears to us that public companies hold 5.1% of hotels in Hong Kong and Shanghai. It may be a strategic interest and both companies may have related business interests. They may have separated. This exploitation probably deserves further investigation.

Next steps:

It is always useful to think about the different groups that own shares in a company. But to better understand hotels in Hong Kong and Shanghai, we need to consider many other factors. To do this, you need to find out about the 2 warning signs we spotted with Hongkong and Shanghai Hotels (including 1 which is significant).

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of interesting companies.

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 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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