Stock Analysis

EHang Holdings Limited's (NASDAQ:EH) stock price dropped 19% last week; individual investors would not be happy

NasdaqGM:EH
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Key Insights

  • Significant control over EHang Holdings by individual investors implies that the general public has more power to influence management and governance-related decisions
  • The top 6 shareholders own 51% of the company
  • Insider ownership in EHang Holdings is 36%

A look at the shareholders of EHang Holdings Limited (NASDAQ:EH) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual investors with 45% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 19% decrease in the stock price last week, individual investors suffered the most losses, but insiders who own 36% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of EHang Holdings.

See our latest analysis for EHang Holdings

ownership-breakdown
NasdaqGM:EH Ownership Breakdown April 16th 2024

What Does The Institutional Ownership Tell Us About EHang 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.

As you can see, institutional investors have a fair amount of stake in EHang Holdings. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 EHang Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGM:EH Earnings and Revenue Growth April 16th 2024

We note that hedge funds don't have a meaningful investment in EHang Holdings. Looking at our data, we can see that the largest shareholder is the CEO Huazhi Hu with 34% of shares outstanding. For context, the second largest shareholder holds about 6.7% of the shares outstanding, followed by an ownership of 3.3% by the third-largest shareholder.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of EHang 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. 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.

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 most recent data indicates that insiders own a reasonable proportion of EHang Holdings Limited. Insiders own US$352m worth of shares in the US$982m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 45% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for EHang Holdings you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Valuation is complex, but we're helping make it simple.

Find out whether EHang Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.