NetEase, Inc. (NASDAQ:NTES) CEO Lei Ding, the company's largest shareholder sees 8.6% reduction in holdings value
Key Insights
Insiders appear to have a vested interest in NetEase's growth, as seen by their sizeable ownership
A total of 3 investors have a majority stake in the company with 52% ownership
A look at the shareholders of NetEase, Inc. (NASDAQ:NTES) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 47% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As market cap fell to US$52b last week, insiders would have faced the highest losses than any other shareholder groups of the company.
Let's take a closer look to see what the different types of shareholders can tell us about NetEase.
View our latest analysis for NetEase
What Does The Institutional Ownership Tell Us About NetEase?
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.
We can see that NetEase does have institutional investors; and they hold a good portion of the company's stock. 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 NetEase's historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in NetEase. With a 47% stake, CEO Lei Ding is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 3.1% and 2.3%, of the shares outstanding, respectively.
After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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 NetEase
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.
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.
It seems insiders own a significant proportion of NetEase, Inc.. It has a market capitalization of just US$52b, and insiders have US$25b worth of shares in their own names. That's quite significant. 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
The general public, who are usually individual investors, hold a 17% stake in NetEase. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.
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.
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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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