The big shareholder groups in Qutoutiao Inc. (NASDAQ:QTT) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
Qutoutiao has a market capitalization of US$1.0b, so we would expect some institutional investors to have noticed the stock. Taking a look at our data on the ownership groups (below), it's seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholder can tell us about Qutoutiao.
View 3 warning signs we detected for Qutoutiao
What Does The Institutional Ownership Tell Us About Qutoutiao?
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.
Qutoutiao already has institutions on the share registry. Indeed, they own 5.7% of the company. 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 Qutoutiao, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Qutoutiao. The company's largest shareholder is Innotech Group Holdings Ltd., with ownership of 43%, With 13% and 9.1% of the shares outstanding respectively, Qutoutiao Inc., Equity Incentive Trust and Lei Li are the second and third largest shareholders. Lei Li also happens to hold the title of Vice Chairman.
Further, we found that the top 2 shareholders have a combined ownership of 55% in the company, meaning that they are powerful enough to influence the decisions of the company.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Qutoutiao
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.
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.
We can see that insiders own shares in Qutoutiao Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$92m worth of shares (at current prices). When analysing a company, looking at ownership may seem a logical place to start. However, there are many other factors to consider, such as the risks within the company itself. For example, we've discovered 3 warning signs for Qutoutiao (of which 1 is major) which any shareholder or potential investor should be aware of.
General Public Ownership
With a 21% ownership, the general public have some degree of sway over QTT. 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.
Private Company Ownership
It seems that Private Companies own 43%, of the QTT stock. 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.
Public Company Ownership
Public companies currently own 8.5% of QTT stock. It's hard to say for sure, but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Qutoutiao better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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