iQIYI's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
The top 2 shareholders own 51% of the company
Every investor in iQIYI, Inc. (NASDAQ:IQ) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is public companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Following a 4.5% decrease in the stock price last week, public companies suffered the most losses, but institutions who own 27% stock also took a hit.
Let's delve deeper into each type of owner of iQIYI, beginning with the chart below.
What Does The Institutional Ownership Tell Us About iQIYI?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
As you can see, institutional investors have a fair amount of stake in iQIYI. 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. 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 iQIYI's earnings history below. Of course, the future is what really matters.
Hedge funds don't have many shares in iQIYI. Our data shows that Baidu, Inc. is the largest shareholder with 46% of shares outstanding. Xiaomi Ventures Limited is the second largest shareholder owning 5.2% of common stock, and Goldman Sachs Group, Investment Banking and Securities Investments holds about 2.7% of the company stock.
A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of iQIYI
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own less than 1% of iQIYI, Inc.. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around US$6.4m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 22% stake in iQIYI. 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
With an ownership of 5.2%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Public Company Ownership
Public companies currently own 46% of iQIYI stock. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - iQIYI has 2 warning signs we think you should be aware of.
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.
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