Cango Inc.'s (NYSE:CANG) market cap dropped US$116m last week; Individual investors bore the brunt

Key Insights

• The considerable ownership by individual investors in Cango indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 43% of the company
• 19% of Cango is held by insiders

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To get a sense of who is truly in control of Cango Inc. (NYSE:CANG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders who own 19% came under pressure after market cap dropped to US$441m last week,individual investors took the most losses.

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

See our latest analysis for Cango

What Does The Institutional Ownership Tell Us About Cango?

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 Cango. 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 Cango, (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 Cango. Our data shows that Xiaojun Zhang is the largest shareholder with 9.7% of shares outstanding. Jiayuan Lin is the second largest shareholder owning 9.5% of common stock, and Boyu Capital Group Management Ltd. holds about 6.9% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Cango

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.

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 information suggests that insiders maintain a significant holding in Cango Inc.. Insiders own US$85m worth of shares in the US$441m company. 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 -- including retail investors -- own 57% of Cango. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

Private equity firms hold a 6.9% stake in Cango. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

It appears to us that public companies own 5.3% of Cango. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Cango , 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.