Tencent Holdings Limited's (HKG:700) stock price dropped 5.0% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in Tencent Holdings indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 50% of the company
• 22% of Tencent Holdings is held by Institutions

Every investor in Tencent Holdings Limited (HKG:700) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 42% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to HK$3.2t last week, retail investors would have faced the highest losses than any other shareholder groups of the company.

Let's take a closer look to see what the different types of shareholders can tell us about Tencent Holdings.

See our latest analysis for Tencent Holdings

What Does The Institutional Ownership Tell Us About Tencent Holdings?

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.

Tencent Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Tencent Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

Tencent Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Naspers Limited with 28% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.5% and 2.5%, of the shares outstanding, respectively. Huateng Pony Ma, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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

Insider Ownership Of Tencent Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in Tencent Holdings Limited. It is a very large company, and board members collectively own HK$257b 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

The general public, who are usually individual investors, hold a 42% stake in Tencent Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

It appears to us that public companies own 28% of Tencent Holdings. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Tencent Holdings better, we need to consider many other factors. Take risks for example - Tencent Holdings has 1 warning sign we think you should be aware of.

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.

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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.