Painful week for individual investors invested in JD.com, Inc. (NASDAQ:JD) after 3.4% drop, institutions also suffered losses

Key Insights

• Significant control over JD.com by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 25 shareholders own 34% of the company
• Insider ownership in JD.com is 11%

A look at the shareholders of JD.com, Inc. (NASDAQ:JD) can tell us which group is most powerful. We can see that individual investors own the lion's share in the company with 50% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 3.4% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 38% stock also took a hit.

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

Check out our latest analysis for JD.com

What Does The Institutional Ownership Tell Us About JD.com?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in JD.com. 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 JD.com, (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 JD.com. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In JD.com's case, its Top Key Executive, Qiangdong Liu, is the largest shareholder, holding 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.3% and 3.2%, of the shares outstanding, respectively.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. 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 JD.com

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.

Our most recent data indicates that insiders own a reasonable proportion of JD.com, Inc.. It is very interesting to see that insiders have a meaningful US$4.3b stake in this US$38b business. 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

The general public -- including retail investors -- own 50% of JD.com. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

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. Be aware that JD.com is showing 1 warning sign in our investment analysis , you should know about...

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.

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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.