The recent 7.6% gain must have brightened Top Key Executive Dejian Liu's week, NetDragon Websoft Holdings Limited's (HKG:777) most bullish insider

Key Insights

• Significant insider control over NetDragon Websoft Holdings implies vested interests in company growth
• The top 4 shareholders own 51% of the company
• Institutional ownership in NetDragon Websoft Holdings is 17%

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. And the group that holds the biggest piece of the pie are individual insiders with 43% ownership. 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 7.6% gain.

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

Check out our latest analysis for NetDragon Websoft Holdings

What Does The Institutional Ownership Tell Us About NetDragon Websoft 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.

We can see that NetDragon Websoft Holdings does have institutional investors; and they hold a good portion of the company's stock. 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. 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. Meanwhile, the second and third largest shareholders, hold 6.5% and 4.1%, of the shares outstanding, respectively. Furthermore, CEO Luyuan Liu is the owner of 4.1% of the company's shares.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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. Insiders own HK$2.5b worth of shares in the HK$5.9b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NetDragon Websoft Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 6.5%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for NetDragon Websoft Holdings that you should be aware of before investing here.

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.

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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.