Yahoo Finance NetEase, Inc. (NASDAQ:NTES) CEO Lei Ding's holdings dropped 15% in value as a result of the recent pullback
Key Insights
Significant insider control over NetEase implies vested interests in company growth
51% of the business is held by the top 3 shareholders
To get a sense of who is truly in control of NetEase, Inc. (NASDAQ:NTES), it is important to understand the ownership structure of the business. With 46% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As market cap fell to US$55b last week, insiders would have faced the highest losses than any other shareholder groups of the company.
Let's delve deeper into each type of owner of NetEase, beginning with the chart below.
See our latest analysis for NetEase
What Does The Institutional Ownership Tell Us About NetEase?
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.
NetEase already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 NetEase's historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in NetEase. The company's CEO Lei Ding is the largest shareholder with 46% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 2.7% and 2.3%, of the shares outstanding, respectively.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of NetEase
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own a reasonable proportion of NetEase, Inc.. It has a market capitalization of just US$55b, and insiders have US$25b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NetEase. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for NetEase that you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
