With 45% ownership, NetEase, Inc. (NASDAQ:NTES) insiders have a lot riding on the company's future
Key Insights
NetEase's significant insider ownership suggests inherent interests in company's expansion
The top 3 shareholders own 50% of the company
If you want to know who really controls NetEase, Inc. (NASDAQ:NTES), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
So, insiders of NetEase have a lot at stake and every decision they make on the company’s future is important to them from a financial point of view.
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 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NetEase, (below). Of course, keep in mind that there are other factors to consider, too.
NetEase is not owned by hedge funds. The company's CEO Lei Ding is the largest shareholder with 45% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 2.7% and 2.6%, 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 50% stake.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 NetEase
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 information suggests that insiders maintain a significant holding in NetEase, Inc.. Insiders own US$28b worth of shares in the US$62b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NetEase. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand NetEase better, we need to consider many other factors. Be aware that NetEase is showing 2 warning signs in our investment analysis , you should know about...
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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