Could The XD Inc. (HKG:2400) Ownership Structure Tell Us Something Useful?

A look at the shareholders of XD Inc. (HKG:2400) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

XD is a pretty big company. It has a market capitalization of HK$30b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutions are not really that prevalent on the share registry. Let's delve deeper into each type of owner, to discover more about XD.

See our latest analysis for XD

What Does The Institutional Ownership Tell Us About XD?

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.

Institutions have a very small stake in XD. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

We note that hedge funds don't have a meaningful investment in XD. Looking at our data, we can see that the largest shareholder is the CEO Yimeng Huang with 36% of shares outstanding. With 15% and 5.0% of the shares outstanding respectively, Yunjie Dai and IGG Inc are the second and third largest shareholders. Interestingly, the second-largest shareholder, Yunjie Dai is also President, again, pointing towards strong insider ownership amongst the company's top shareholders.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of XD

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own the majority of XD Inc.. This means they can collectively make decisions for the company. Insiders own HK$16b worth of shares in the HK$30b company. That's extraordinary! It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

With a 32% ownership, the general public have some degree of sway over XD. 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 Company Ownership

It seems that Private Companies own 5.8%, of the XD stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 5.0% of the XD shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that XD is showing 2 warning signs in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

If you’re looking to trade XD, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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