Institutional owners may take dramatic actions as GDS Holdings Limited's (NASDAQ:GDS) recent 3.4% drop adds to one-year losses
Key Insights
Institutions' substantial holdings in GDS Holdings implies that they have significant influence over the company's share price
A total of 5 investors have a majority stake in the company with 51% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of GDS Holdings Limited (NASDAQ:GDS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 45% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And institutional investors endured the highest losses after the company's share price fell by 3.4% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 68% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell GDS Holdings which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about GDS Holdings.
View our latest analysis for GDS Holdings
What Does The Institutional Ownership Tell Us About GDS Holdings?
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.
As you can see, institutional investors have a fair amount of stake in GDS Holdings. 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 GDS Holdings, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in GDS Holdings. Our data shows that STT GDC Pte. Ltd. is the largest shareholder with 32% of shares outstanding. With 4.9% and 4.8% of the shares outstanding respectively, Wei Huang and Canada Pension Plan Investment Board are the second and third largest shareholders. Wei Huang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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 GDS Holdings
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. 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 most recent data indicates that insiders own some shares in GDS Holdings Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$102m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. 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.
Private Company Ownership
Our data indicates that Private Companies hold 32%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with GDS Holdings , and understanding them should be part of your investment process.
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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