Could Tencent Holdings Limited’s (HKG:700) Investor Composition Influence The Stock Price?

Every investor in Tencent Holdings Limited (HKG:700) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

Tencent Holdings has a market capitalization of HK$3.2t, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below below, we can see that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about 700.

Check out our latest analysis for Tencent Holdings

SEHK:700 Ownership Summary, August 22nd 2019
SEHK:700 Ownership Summary, August 22nd 2019

What Does The Institutional Ownership Tell Us About Tencent Holdings?

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 Tencent Holdings does have institutional investors; and they hold 23% of the stock. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Tencent Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:700 Income Statement, August 22nd 2019
SEHK:700 Income Statement, August 22nd 2019

Tencent Holdings is not owned by hedge funds. 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 Tencent 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.

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 some shares in Tencent Holdings Limited. It is a very large company, and board members collectively own HK$252b worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 38% ownership, the general public have some degree of sway over 700. 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 31% of 700 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:

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.