Li Auto Inc.'s (NASDAQ:LI) most bullish insider, CEO Xiang Li must be pleased with the recent 5.2% gain

Key Insights

• Insiders appear to have a vested interest in Li Auto's growth, as seen by their sizeable ownership
• 51% of the business is held by the top 6 shareholders
• 25% of Li Auto is held by Institutions

A look at the shareholders of Li Auto Inc. (NASDAQ:LI) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 31% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit US$37b market cap following a 5.2% gain in the stock.

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

View our latest analysis for Li Auto

What Does The Institutional Ownership Tell Us About Li Auto?

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.

As you can see, institutional investors have a fair amount of stake in Li Auto. 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. 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 Li Auto, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Li Auto. Looking at our data, we can see that the largest shareholder is the CEO Xiang Li with 23% of shares outstanding. With 13% and 6.3% of the shares outstanding respectively, Meituan and Xing Wang are the second and third largest shareholders. Interestingly, the third-largest shareholder, Xing Wang is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Li Auto

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

It seems insiders own a significant proportion of Li Auto Inc.. It has a market capitalization of just US$37b, and insiders have US$11b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Li Auto. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 3.9%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

It appears to us that public companies own 13% of Li Auto. 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:

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. For instance, we've identified 1 warning sign for Li Auto that you should be aware of.

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.