Key Insights

• Significant control over Youdao by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is NetEase, Inc. with a 57% stake
• Insiders own 20% of Youdao

If you want to know who really controls Youdao, Inc. (NYSE:DAO), then you'll have to look at the makeup of its share registry. With 57% stake, public companies 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.

Following a 32% increase in the stock price last week, public companies profited the most, but insiders who own 20% stock also stood to gain from the increase.

In the chart below, we zoom in on the different ownership groups of Youdao.

What Does The Institutional Ownership Tell Us About Youdao?

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.

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

We note that hedge funds don't have a meaningful investment in Youdao. NetEase, Inc. is currently the company's largest shareholder with 57% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 17% of the shares outstanding, followed by an ownership of 8.0% by the third-largest shareholder. Feng Zhou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Youdao

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 information suggests that insiders maintain a significant holding in Youdao, Inc.. Insiders own US$85m worth of shares in the US$418m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Youdao. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

We can see that public companies hold 57% of the Youdao 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:

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 Youdao 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.

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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.