Alibaba Group Holding Limited's (NYSE:BABA) just made fresh new lows, falling to levels not seen in 2 years. The stock is now dipping to a price-to-earnings ratio below 20, which is hard to imagine for an internet retailer in 2020.
We will take a look at the shareholder structure and see what it can tell us about the current state of the company
No Breathing Space for Chinese Stocks
Chinese regulators kept the pressure through this week. After issuing a fresh draft about the unfair competition on the internet, they approved a strict data privacy law. The Standing Committee of the National People's Congress passed the Personal Information Protection Law – aimed at online fraud, information theft, and, most importantly, data collection by domestic tech companies.
Meanwhile, SEC Chairman Gary Gensler issued a warning about Chinese companies quoting their willingness to bypass their domestic laws by operating through shell companies in other countries. It is no secret that there is a significant flow of capital in the gray area between China and havens like the Cayman Islands.
On the more positive side, Alibaba is moving toward the NFT-mania, opening up the Blockchain Digital Copyright and Asset Trade. Trading will be done through a blockchain-backed by the Sichuan provincial government.
Alibaba stock is slowly moving into the value territory.
Alibaba Group Holding is a pretty big company. It has a market capitalization of US$435b. Normally institutions would own a significant portion of a company this size.
Let's take a closer look to see what the different types of shareholders can tell us about Alibaba Group Holding.
Institutional Ownership is Considerable
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 Alibaba Group Holding. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock simultaneously, you could see the share price drop fast. It's, therefore, worth looking at Alibaba Group Holding's earnings history below. Of course, the future is what really matters.
SoftBank Group Corp. is currently the company's largest shareholder, with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 2.6% and 2.5% of the stock.
Our research suggests that the top 25 shareholders collectively control less than half of the company's shares, meaning that the shares are widely disseminated, and there is no dominant shareholder.
While studying institutional ownership data for a company makes sense, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are founders or CEOs.
Insider ownership is positive when it signals leadership is 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.
At the moment, Insiders own US$15b worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public holds a 30% stake in Alibaba Group Holding. While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies.
Public Company Ownership
We can see that public companies hold 25% of the Alibaba Group Holding shares on issue. We can't be certain, but this may be a strategic stake. The businesses may be similar or work together.
While it is well worth considering the different groups that own a company, other factors are even more important. Consider, for instance, the ever-present specter of investment risk. We've identified 2 warning signs with Alibaba Group Holding , and understanding them should be part of your investment process.
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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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article 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.
Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.
Alibaba Group Holding
Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with reasonable growth potential.