Zhihu Inc.'s (NYSE:ZH) market cap dropped US$84m last week; individual investors who hold 29% were hit as were institutions

Key Insights

• The considerable ownership by retail investors in Zhihu indicates that they collectively have a greater say in management and business strategy
• 52% of the business is held by the top 7 shareholders
• Insider ownership in Zhihu is 21%

To get a sense of who is truly in control of Zhihu Inc. (NYSE:ZH), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 29% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of retail investors took a hit after last week’s 9.1% price drop, institutions with their 25% holdings also suffered.

Let's delve deeper into each type of owner of Zhihu, beginning with the chart below.

See our latest analysis for Zhihu

What Does The Institutional Ownership Tell Us About Zhihu?

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

We note that hedge funds don't have a meaningful investment in Zhihu. Looking at our data, we can see that the largest shareholder is Tencent Holdings Limited with 13% of shares outstanding. Yuan Zhou is the second largest shareholder owning 12% of common stock, and Kuaishou Technology holds about 6.6% of the company stock. Yuan Zhou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Zhihu

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Zhihu Inc.. It has a market capitalization of just US$627m, and insiders have US$131m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Zhihu. 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 5.5%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

We can see that public companies hold 19% of the Zhihu shares on issue. 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 Zhihu better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.