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A look at the shareholders of China Online Education Group (NYSE:COE) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
With a market capitalization of US$341m, China Online Education Group is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about China Online Education Group.
What Does The Institutional Ownership Tell Us About China Online Education Group?
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.
China Online Education Group 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 China Online Education Group's historic earnings and revenue below, but keep in mind there's always more to the story.
China Online Education Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is DCM Ventures with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 12%, of the shares outstanding, respectively. Jiajia Huang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
Our research also brought to light the fact that roughly 55% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of China Online Education Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Our most recent data indicates that insiders own a reasonable proportion of China Online Education Group. Insiders have a US$63m stake in this US$341m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public holds a 15% stake in China Online Education Group. 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
With a stake of 42%, private equity firms could influence the China Online Education Group board. 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 7.3% of China Online Education Group. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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. For instance, we've identified 3 warning signs for China Online Education Group (1 makes us a bit uncomfortable) that you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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. 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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