NIO Inc. (NYSE:NIO) surges 6.0%; individual investors who own 49% shares profited along with institutions

By
Simply Wall St
Published
January 13, 2022
NYSE:NIO
Source: Shutterstock

To get a sense of who is truly in control of NIO Inc. (NYSE:NIO), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 49% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that benefitted the most from last week’s US$2.9b market cap gain, institutions too had a 31% share in those profits.

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

Check out our latest analysis for NIO

ownership-breakdown
NYSE:NIO Ownership Breakdown January 13th 2022

What Does The Institutional Ownership Tell Us About NIO?

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.

As you can see, institutional investors have a fair amount of stake in NIO. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NIO's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:NIO Earnings and Revenue Growth January 13th 2022

NIO is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO William Li with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.5% and 5.7% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of NIO

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in NIO Inc.. Insiders own US$5.6b worth of shares in the US$50b company. That's quite meaningful. 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 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NIO. 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

We can see that public companies hold 8.5% of the NIO shares on issue. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with NIO , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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