While institutions invested in iQIYI, Inc. (NASDAQ:IQ) benefited from last week's 18% gain, public companies stood to gain the most
Key Insights
Significant control over iQIYI by public companies implies that the general public has more power to influence management and governance-related decisions
The top 2 shareholders own 54% of the company
If you want to know who really controls iQIYI, Inc. (NASDAQ:IQ), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 46% to be precise, is public companies. Put another way, the group faces the maximum upside potential (or downside risk).
While public companies were the group that reaped the most benefits after last week’s 18% price gain, institutions also received a 31% cut.
Let's take a closer look to see what the different types of shareholders can tell us about iQIYI.
Check out our latest analysis for iQIYI
What Does The Institutional Ownership Tell Us About iQIYI?
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.
We can see that iQIYI does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 iQIYI, (below). Of course, keep in mind that there are other factors to consider, too.
Our data indicates that hedge funds own 8.3% of iQIYI. 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. Baidu, Inc. is currently the largest shareholder, with 46% of shares outstanding. With 8.3% and 5.1% of the shares outstanding respectively, CoreView Capital Management Limited and Xiaomi Ventures Limited are the second and third largest shareholders.
After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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 iQIYI
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.
Our information suggests that iQIYI, Inc. insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own US$5.8m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 10% stake in iQIYI. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 5.1%, private equity firms could influence the iQIYI board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Public Company Ownership
It appears to us that public companies own 46% of iQIYI. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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. To that end, you should learn about the 3 warning signs we've spotted with iQIYI (including 1 which can't be ignored) .
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.
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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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