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Is Xinyuan Real Estate Co., Ltd.'s (NYSE:XIN) Shareholder Ownership Skewed Towards Insiders?

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·5 min read
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A look at the shareholders of Xinyuan Real Estate Co., Ltd. (NYSE:XIN) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.

Xinyuan Real Estate is not a large company by global standards. It has a market capitalization of US$180m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are not really that prevalent on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Xinyuan Real Estate.

See our latest analysis for Xinyuan Real Estate

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Xinyuan Real Estate?

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.

Since institutions own only a small portion of Xinyuan Real Estate, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in Xinyuan Real Estate. The company's CEO Yong Zhang is the largest shareholder with 22% of shares outstanding. For context, the second largest shareholder holds about 22% of the shares outstanding, followed by an ownership of 1.5% by the third-largest shareholder. Interestingly, the second-largest shareholder, Yuyan Yang is also Top Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Xinyuan Real Estate

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. 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 most recent data indicates that insiders own a reasonable proportion of Xinyuan Real Estate Co., Ltd.. Insiders have a US$79m stake in this US$180m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public -- mostly retail investors -- own 52% of Xinyuan Real Estate. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Xinyuan Real Estate better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Xinyuan Real Estate (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

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.