With 35% ownership, Pinduoduo Inc. (NASDAQ:PDD) insiders have a lot riding on the company's future
Every investor in Pinduoduo Inc. (NASDAQ:PDD) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 35% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
So it follows, every decision made by insiders of Pinduoduo regarding the company's future would be crucial to them.
In the chart below, we zoom in on the different ownership groups of Pinduoduo.
View our latest analysis for Pinduoduo
What Does The Institutional Ownership Tell Us About Pinduoduo?
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.
As you can see, institutional investors have a fair amount of stake in Pinduoduo. 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 Pinduoduo, (below). Of course, keep in mind that there are other factors to consider, too.
Pinduoduo is not owned by hedge funds. Our data shows that Zheng Huang is the largest shareholder with 35% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 15% and 6.6%, of the shares outstanding, respectively.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Pinduoduo
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 Pinduoduo Inc.. It is very interesting to see that insiders have a meaningful US$39b stake in this US$110b business. 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
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Pinduoduo. 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
Private equity firms hold a 6.6% stake in Pinduoduo. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Public Company Ownership
Public companies currently own 15% of Pinduoduo stock. 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. Be aware that Pinduoduo is showing 1 warning sign in our investment analysis , you should know about...
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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