Institutional investors may adopt severe steps after Zai Lab Limited's (NASDAQ:ZLAB) latest 6.3% drop adds to a year losses
Key Insights
Institutions' substantial holdings in Zai Lab implies that they have significant influence over the company's share price
53% of the business is held by the top 9 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
A look at the shareholders of Zai Lab Limited (NASDAQ:ZLAB) can tell us which group is most powerful. With 79% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors endured the highest losses after the company's share price fell by 6.3% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 24% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Zai Lab which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Zai Lab.
View our latest analysis for Zai Lab
What Does The Institutional Ownership Tell Us About Zai Lab?
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.
As you can see, institutional investors have a fair amount of stake in Zai Lab. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Zai Lab's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Zai Lab. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 13% of shares outstanding. Qiming Weichuang Venture Capital Management (Shanghai) Company Limited is the second largest shareholder owning 8.1% of common stock, and Wellington Management Group LLP holds about 6.9% of the company stock. Furthermore, CEO Ying Du is the owner of 1.0% of the company's shares.
We did some more digging and found that 9 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Zai Lab
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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 most recent data indicates that insiders own some shares in Zai Lab Limited. This is a big company, so it is good to see this level of alignment. Insiders own US$49m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 11% stake in Zai Lab. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 8.1%, private equity firms could influence the Zai Lab 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.
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 - Zai Lab has 2 warning signs we think 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.
