With a 30% stake, Li Auto Inc. (NASDAQ:LI) insiders have a lot riding on the company

Key Insights

• Li Auto's significant insider ownership suggests inherent interests in company's expansion
• 51% of the business is held by the top 5 shareholders
• Institutional ownership in Li Auto is 27%

To get a sense of who is truly in control of Li Auto Inc. (NASDAQ:LI), it is important to understand the ownership structure of the business. With 30% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

So, insiders of Li Auto have a lot at stake and every decision they make on the company’s future is important to them from a financial point of view.

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

Check out our latest analysis for Li Auto

What Does The Institutional Ownership Tell Us About Li Auto?

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 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. 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 Li Auto's historic earnings and revenue below, but keep in mind there's always more to the story.

Li Auto is not owned by hedge funds. The company's CEO Xiang Li is the largest shareholder with 23% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 6.1%, of the shares outstanding, respectively. 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.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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

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.

Our most recent data indicates that insiders own a reasonable proportion of Li Auto Inc.. Insiders own US$6.9b worth of shares in the US$23b company. That's quite meaningful. 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-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. 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

We can see that Private Companies own 3.9%, 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.

Public Company Ownership

Public companies currently own 13% of Li Auto 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Li Auto better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.