JOYY Inc.'s (NASDAQ:YY) Latest 5.6% Decline Adds to One-year Losses, Institutional Investors May Consider Drastic Measures

Simply Wall St · Mar 16, 2023 23:46

Key Insights

Significantly high institutional ownership implies JOYY's stock price is sensitive to their trading actions
The top 7 shareholders own 51% of the company
Insider ownership in JOYY is 34%

Every investor in JOYY Inc. (NASDAQ:YY) should be aware of the most powerful shareholder groups. With 47% stake, institutions 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.

And institutional investors endured the highest losses after the company's share price fell by 5.6% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 24% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in JOYY's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of JOYY, beginning with the chart below.

View our latest analysis for JOYY

ownership-breakdown — NasdaqGS:YY Ownership Breakdown March 16th 2023

What Does The Institutional Ownership Tell Us About JOYY?

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.

JOYY 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. 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 JOYY's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — NasdaqGS:YY Earnings and Revenue Growth March 16th 2023

We note that hedge funds don't have a meaningful investment in JOYY. The company's CEO Xueling Li is the largest shareholder with 25% of shares outstanding. Jun Lei is the second largest shareholder owning 8.7% of common stock, and T. Rowe Price Group, Inc. holds about 5.5% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 JOYY

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. 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 JOYY Inc.. Insiders own US$654m worth of shares in the US$1.9b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in JOYY. 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:

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. Take risks for example - JOYY has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.

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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.