NetDragon Websoft Holdings Limited's (HKG:777) most bullish insider, Top Key Executive Dejian Liu must be pleased with the recent 6.1% gain

Key Insights

• Significant insider control over NetDragon Websoft Holdings implies vested interests in company growth
• The top 3 shareholders own 50% of the company
• Institutional ownership in NetDragon Websoft Holdings is 11%

To get a sense of who is truly in control of NetDragon Websoft Holdings Limited (HKG:777), it is important to understand the ownership structure of the business. With 43% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders were the biggest beneficiaries of last week’s 6.1% gain.

Let's delve deeper into each type of owner of NetDragon Websoft Holdings, beginning with the chart below.

View our latest analysis for NetDragon Websoft Holdings

What Does The Institutional Ownership Tell Us About NetDragon Websoft 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 NetDragon Websoft Holdings 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. 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 NetDragon Websoft Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in NetDragon Websoft Holdings. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In NetDragon Websoft Holdings' case, its Top Key Executive, Dejian Liu, is the largest shareholder, holding 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 6.5% of the stock. Additionally, the company's CEO Luyuan Liu directly holds 4.1% of the total shares outstanding.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 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 NetDragon Websoft Holdings

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.

It seems insiders own a significant proportion of NetDragon Websoft Holdings Limited. It is very interesting to see that insiders have a meaningful HK$3.4b stake in this HK$7.9b 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

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NetDragon Websoft 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.

Private Equity Ownership

With an ownership of 7.5%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

We can see that Private Companies own 6.5%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NetDragon Websoft Holdings better, we need to consider many other factors. Be aware that NetDragon Websoft Holdings 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.

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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.