Institutional owners may take dramatic actions as JOYY Inc.'s (NASDAQ:YY) recent 5.6% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in JOYY implies that they have significant influence over the company's share price
• 51% of the business is held by the top 7 shareholders
• Insiders own 34% of JOYY

If you want to know who really controls JOYY Inc. (NASDAQ:YY), then you'll have to look at the makeup of its share registry. With 47% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$115m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 24% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell JOYY which might hurt individual investors.

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

View our latest analysis for JOYY

What Does The Institutional Ownership Tell Us About JOYY?

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 JOYY. 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 JOYY, (below). Of course, keep in mind that there are other factors to consider, too.

JOYY is not owned by hedge funds. The company's CEO Xueling Li is the largest shareholder with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.7% and 5.5% of the stock.

We also observed that the top 7 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.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of JOYY

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.

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 information suggests that insiders maintain a significant holding in JOYY Inc.. Insiders own US$654m worth of shares in the US$1.9b 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 19% stake in JOYY. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for JOYY (1 doesn't sit too well with us) that you should be aware of.

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.

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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.