Individual investors invested in BEST Inc. (NYSE:BEST) copped the brunt of last week's US$36m market cap decline

By
Simply Wall St
Published
March 14, 2022
NYSE:BEST
Source: Shutterstock

To get a sense of who is truly in control of BEST Inc. (NYSE:BEST), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 37% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to US$211m last week, individual investors would have faced the highest losses than any other shareholder groups of the company.

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

View our latest analysis for BEST

ownership-breakdown
NYSE:BEST Ownership Breakdown March 14th 2022

What Does The Institutional Ownership Tell Us About BEST?

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 BEST. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see BEST's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:BEST Earnings and Revenue Growth March 14th 2022

Hedge funds don't have many shares in BEST. Looking at our data, we can see that the largest shareholder is Alibaba Group Holding Limited with 27% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 8.6% by the third-largest shareholder. Shao-Ning Chou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On looking further, we found that 51% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of BEST

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.

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 BEST Inc.. Insiders own US$30m worth of shares in the US$211m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over BEST. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 8.6% stake in BEST. 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

We can see that public companies hold 27% of the BEST shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand BEST better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for BEST (of which 1 shouldn't be ignored!) you should know about.

If you are 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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