NetEase Cloud Music Inc.'s (HKG:9899) stock price dropped 5.7% last week; public companies would not be happy

Key Insights

• Significant control over NetEase Cloud Music by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is NetEase, Inc. with a 60% stake
• Recent sales by insiders

Every investor in NetEase Cloud Music Inc. (HKG:9899) should be aware of the most powerful shareholder groups. We can see that public companies own the lion's share in the company with 65% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, public companies as a group endured the highest losses last week after market cap fell by HK$1.6b.

Let's delve deeper into each type of owner of NetEase Cloud Music, beginning with the chart below.

Check out our latest analysis for NetEase Cloud Music

What Does The Institutional Ownership Tell Us About NetEase Cloud Music?

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.

As you can see, institutional investors have a fair amount of stake in NetEase Cloud Music. 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 NetEase Cloud Music's historic earnings and revenue below, but keep in mind there's always more to the story.

NetEase Cloud Music is not owned by hedge funds. Our data shows that NetEase, Inc. is the largest shareholder with 60% of shares outstanding. This implies that they have majority interest control of the future of the company. With 4.9% and 4.8% of the shares outstanding respectively, Alibaba Group Holding Limited and Yunfeng Capital are the second and third largest shareholders.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of NetEase Cloud Music

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 information suggests that NetEase Cloud Music Inc. insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$812k worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 26% stake in NetEase Cloud Music. 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

Public companies currently own 65% of NetEase Cloud Music stock. 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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

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

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.