After losing 27% in the past year, Sea Limited (NYSE:SE) institutional owners must be relieved by the recent gain

Key Insights

• Given the large stake in the stock by institutions, Sea's stock price might be vulnerable to their trading decisions
• A total of 9 investors have a majority stake in the company with 50% ownership
• Insider ownership in Sea is 16%

Every investor in Sea Limited (NYSE:SE) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 52% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's US$827m market cap gain would probably be appreciated by institutional investors, especially after a year of 27% losses.

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

View our latest analysis for Sea

What Does The Institutional Ownership Tell Us About Sea?

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.

As you can see, institutional investors have a fair amount of stake in Sea. 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 Sea's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Sea. Our data shows that Tencent Holdings Limited is the largest shareholder with 18% of shares outstanding. For context, the second largest shareholder holds about 8.5% of the shares outstanding, followed by an ownership of 5.3% by the third-largest shareholder. Note that the second and third-largest shareholders are also Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Sea

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 Sea Limited. It has a market capitalization of just US$21b, and insiders have US$3.3b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sea. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

It appears to us that public companies own 18% of Sea. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Sea , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.