Painful week for individual investors invested in Canaan Inc. (NASDAQ:CAN) after 13% drop, institutions also suffered losses

Key Insights

• Significant control over Canaan by individual investors implies that the general public has more power to influence management and governance-related decisions
• 36% of the business is held by the top 25 shareholders
• Insiders own 12% of Canaan

To get a sense of who is truly in control of Canaan Inc. (NASDAQ:CAN), 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 59% 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 individual investors took a hit after last week’s 13% price drop, institutions with their 29% holdings also suffered.

Let's take a closer look to see what the different types of shareholders can tell us about Canaan.

View our latest analysis for Canaan

What Does The Institutional Ownership Tell Us About Canaan?

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 Canaan. 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 at the same time, you could see the share price drop fast. It's therefore worth looking at Canaan's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Canaan. The company's CEO Nangeng Zhang is the largest shareholder with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.3% and 2.8%, 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Canaan

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

It seems insiders own a significant proportion of Canaan Inc.. It has a market capitalization of just US$530m, and insiders have US$63m 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 substantial 59% stake in Canaan, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

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 2 warning signs with Canaan , 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.