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Institutions Along With Individual Investors Who Hold Considerable Shares InZhihu Inc. (NYSE:ZH) Come Under Pressure; Lose 9.1% of Holdings Value

Simply Wall St ·  11/30/2023 20:07

Key Insights

  • Zhihu's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
  • 52% of the business is held by the top 7 shareholders
  • 21% of Zhihu is held by insiders

Every investor in Zhihu Inc. (NYSE:ZH) should be aware of the most powerful shareholder groups. We can see that individual investors own the lion's share in the company with 29% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 9.1% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 25% stock also took a hit.

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

Check out our latest analysis for Zhihu

ownership-breakdown
NYSE:ZH Ownership Breakdown November 30th 2023

What Does The Institutional Ownership Tell Us About Zhihu?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

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

earnings-and-revenue-growth
NYSE:ZH Earnings and Revenue Growth November 30th 2023

We note that hedge funds don't have a meaningful investment in Zhihu. The company's largest shareholder is Tencent Holdings Limited, with ownership of 13%. Meanwhile, the second and third largest shareholders, hold 12% and 6.6%, of the shares outstanding, respectively. Yuan Zhou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Zhihu

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.

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 information suggests that insiders maintain a significant holding in Zhihu Inc.. Insiders own US$131m worth of shares in the US$627m company. 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-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 5.5%, private equity firms could influence the Zhihu 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

We can see that public companies hold 19% of the Zhihu shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Zhihu better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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