Youdao, Inc.'s (NYSE:DAO) last week's 9.4% decline must have disappointed public companies who have a significant stake
Key Insights
Youdao's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
NetEase, Inc. owns 55% of the company
A look at the shareholders of Youdao, Inc. (NYSE:DAO) can tell us which group is most powerful. We can see that public companies own the lion's share in the company with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Following a 9.4% decrease in the stock price last week, public companies suffered the most losses, but insiders who own 20% stock also took a hit.
Let's delve deeper into each type of owner of Youdao, beginning with the chart below.
See our latest analysis for Youdao
What Does The Institutional Ownership Tell Us About Youdao?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Youdao 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 Youdao, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in Youdao. Looking at our data, we can see that the largest shareholder is NetEase, Inc. with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 16% and 8.3% of the shares outstanding respectively, Feng Zhou and Orbis Investment Management Limited are the second and third largest shareholders. Feng Zhou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
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 Youdao
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 insiders maintain a significant holding in Youdao, Inc.. It has a market capitalization of just US$491m, and insiders have US$96m worth of shares in their own names. 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
With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Youdao. 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.
Public Company Ownership
Public companies currently own 55% of Youdao 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Youdao , 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.
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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.
