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Public companies who have a significant stake must be disappointed along with institutions after iQIYI, Inc.'s (NASDAQ:IQ) market cap dropped by US$125m
Significant control over iQIYI by public companies implies that the general public has more power to influence management and governance-related decisions
50% of the business is held by the top 2 shareholders
To get a sense of who is truly in control of iQIYI, Inc. (NASDAQ:IQ), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 45% 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).
While institutions who own 31% came under pressure after market cap dropped to US$1.9b last week,public companies took the most losses.
Let's take a closer look to see what the different types of shareholders can tell us about iQIYI.
NasdaqGS:IQ Ownership Breakdown November 25th 2024
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.
iQIYI already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 iQIYI's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:IQ Earnings and Revenue Growth November 25th 2024
iQIYI is not owned by hedge funds. The company's largest shareholder is Baidu, Inc., with ownership of 45%. In comparison, the second and third largest shareholders hold about 5.1% and 2.4% of the 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 50% 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of iQIYI
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 most recent data indicates that insiders own less than 1% of iQIYI, Inc.. Keep in mind that it's a big company, and the insiders own US$2.3m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 18% stake in iQIYI. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 5.1%, private equity firms could influence the iQIYI board. 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 45% of iQIYI stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for iQIYI (1 is potentially serious!) that you should be aware of before investing here.
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.
