Yahoo Finance NetEase, Inc.'s (NASDAQ:NTES) CEO Lei Ding is the most upbeat insider, and their holdings increased by 6.5% last week
Key Insights
Insiders appear to have a vested interest in NetEase's growth, as seen by their sizeable ownership
The top 3 shareholders own 50% of the company
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. We can see that individual insiders own the lion's share in the company with 45% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, insiders were the biggest beneficiaries of last week’s 6.5% gain.
Let's take a closer look to see what the different types of shareholders can tell us about NetEase.
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.
We can see that NetEase does have institutional investors; and they hold a good portion of the company's stock. 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 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. Looking at our data, we can see that the largest shareholder is the CEO Lei Ding with 45% of shares outstanding. For context, the second largest shareholder holds about 2.7% of the shares outstanding, followed by an ownership of 2.5% by the third-largest shareholder.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
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 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.
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.
It seems insiders own a significant proportion of NetEase, Inc.. It is very interesting to see that insiders have a meaningful US$30b stake in this US$67b business. 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
The general public, who are usually individual investors, hold a 21% stake in 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:
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. For example, we've discovered 2 warning signs for NetEase that you should be aware of before investing here.
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.
