Institutional investors in PDD Holdings Inc. (NASDAQ:PDD) see US$10b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Significantly high institutional ownership implies PDD Holdings' stock price is sensitive to their trading actions
• 53% of the business is held by the top 3 shareholders
• Insider ownership in PDD Holdings is 34%

Every investor in PDD Holdings Inc. (NASDAQ:PDD) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 37% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 6.3% last week. However, the 62% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

In the chart below, we zoom in on the different ownership groups of PDD Holdings.

See our latest analysis for PDD Holdings

What Does The Institutional Ownership Tell Us About PDD Holdings?

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.

As you can see, institutional investors have a fair amount of stake in PDD 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. 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 PDD Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

PDD Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Zheng Huang with 34% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 4.6% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

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 PDD 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.

It seems insiders own a significant proportion of PDD Holdings Inc.. It is very interesting to see that insiders have a meaningful US$51b stake in this US$152b business. 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 15% stake in PDD Holdings. 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.

Public Company Ownership

Public companies currently own 15% of PDD Holdings 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:

It's always worth thinking about the different groups who own shares in a company. But to understand PDD Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with PDD Holdings .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.