The big shareholder groups in LexinFintech Holdings Ltd. (NASDAQ:LX) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
LexinFintech Holdings isn't enormous, but it's not particularly small either. It has a market capitalization of US$1.7b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about LexinFintech Holdings.
What Does The Institutional Ownership Tell Us About LexinFintech 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 LexinFintech 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. 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 LexinFintech Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
Our data indicates that hedge funds own 8.3% of LexinFintech Holdings. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's CEO Wenjie Xiao is the largest shareholder with 28% of shares outstanding. The second and third largest shareholders are Oceanlink Management Ltd. and K2 Partners II L.P., with an equal amount of shares to their name at 8.3%.
On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of LexinFintech Holdings
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.
Our information suggests that insiders maintain a significant holding in LexinFintech Holdings Ltd.. It is very interesting to see that insiders have a meaningful US$479m stake in this US$1.7b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public holds a 26% stake in LexinFintech Holdings. 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 an ownership of 8.2%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.
Public Company Ownership
Public companies currently own 3.3% of LexinFintech Holdings stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 3 warning signs for LexinFintech Holdings (1 can't be ignored!) 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.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.