Private equity firms are 17 Education & Technology Group Inc.'s (NASDAQ:YQ) biggest owners and were rewarded after market cap rose by US$26m last week

By
Simply Wall St
Published
March 10, 2022
NasdaqGS:YQ
Source: Shutterstock

To get a sense of who is truly in control of 17 Education & Technology Group Inc. (NASDAQ:YQ), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private equity firms benefitted the most after the company's market cap rose by US$26m last week.

In the chart below, we zoom in on the different ownership groups of 17 Education & Technology Group.

View our latest analysis for 17 Education & Technology Group

ownership-breakdown
NasdaqGS:YQ Ownership Breakdown March 10th 2022

What Does The Institutional Ownership Tell Us About 17 Education & Technology Group?

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.

17 Education & Technology Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 17 Education & Technology Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:YQ Earnings and Revenue Growth March 10th 2022

17 Education & Technology Group is not owned by hedge funds. The company's CEO Andy Liu is the largest shareholder with 12% of shares outstanding. With 12% and 10% of the shares outstanding respectively, H Capital Management Co., Ltd. and Shunwei, Inc. are the second and third largest shareholders.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of 17 Education & Technology Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 17 Education & Technology Group Inc.. Insiders have a US$21m stake in this US$102m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 23% 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.

Private Equity Ownership

With an ownership of 41%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 3.9%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand 17 Education & Technology Group better, we need to consider many other factors. Be aware that 17 Education & Technology Group is showing 2 warning signs in our investment analysis , you should know about...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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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