Is iQIYI, Inc. (NASDAQ:IQ) Popular Amongst Institutions?
A look at the shareholders of iQIYI, Inc. (NASDAQ:IQ) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.
With a market capitalization of US$3.7b, iQIYI is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about iQIYI.
View our latest analysis for iQIYI
What Does The Institutional Ownership Tell Us About iQIYI?
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.
iQIYI already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 iQIYI's earnings history below. Of course, the future is what really matters.
We note that hedge funds don't have a meaningful investment in iQIYI. Looking at our data, we can see that the largest shareholder is Baidu, Inc. with 53% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 5.9% and 4.7% of the stock.
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 iQIYI
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.
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 data suggests that insiders own under 1% of iQIYI, Inc. in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around US$4.1m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over iQIYI. 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 Equity Ownership
With a stake of 5.9%, private equity firms could influence the iQIYI board. 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 53% of iQIYI stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - iQIYI has 3 warning signs we think you should be aware of.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
