With a 45% stake, NetEase, Inc. (NASDAQ:NTES) insiders have a lot riding on the company

Key Insights

• Insiders appear to have a vested interest in NetEase's growth, as seen by their sizeable ownership
• The top 3 shareholders own 50% of the company
• Institutions own 32% of NetEase

A look at the shareholders of NetEase, Inc. (NASDAQ:NTES) can tell us which group is most powerful. We can see that individual insiders own the lion's share in the company with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

So it follows, every decision made by insiders of NetEase regarding the company's future would be crucial to them.

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

Check out our latest analysis for NetEase

What Does The Institutional Ownership Tell Us About NetEase?

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.

We can see that NetEase does have institutional investors; and they hold a good portion of the company's stock. 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 NetEase, (below). Of course, keep in mind that there are other factors to consider, too.

NetEase is not owned by hedge funds. With a 45% stake, CEO Lei Ding is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 2.8% and 2.6%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of NetEase

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 NetEase, Inc.. Insiders own US$23b worth of shares in the US$50b company. That's quite meaningful. 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

The general public, who are usually individual investors, hold a 23% stake in NetEase. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that NetEase is showing 2 warning signs in our investment analysis , 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.