Significant control over Sohu.com by private companies implies that the general public has more power to influence management and governance-related decisions
51% of the business is held by the top 4 shareholders
If you want to know who really controls Sohu.com Limited (NASDAQ:SOHU), then you'll have to look at the makeup of its share registry. With 34% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Meanwhile, institutions make up 34% of the company’s shareholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.
Let's delve deeper into each type of owner of Sohu.com, beginning with the chart below.
NasdaqGS:SOHU Ownership Breakdown December 13th 2024
What Does The Institutional Ownership Tell Us About Sohu.com?
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.
We can see that Sohu.com does have institutional investors; and they hold a good portion of the company's stock. 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 Sohu.com's earnings history below. Of course, the future is what really matters.
NasdaqGS:SOHU Earnings and Revenue Growth December 13th 2024
Hedge funds don't have many shares in Sohu.com. Looking at our data, we can see that the largest shareholder is Photon Group Limited with 34% of shares outstanding. For context, the second largest shareholder holds about 10% of the shares outstanding, followed by an ownership of 3.1% by the third-largest shareholder. Furthermore, CEO Chaoyang Zhang is the owner of 0.8% of the company's shares.
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.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Sohu.com
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.
We can see that insiders own shares in Sohu.com Limited. It has a market capitalization of just US$447m, and insiders have US$5.8m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 30% stake in Sohu.com. 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 Company Ownership
We can see that Private Companies own 34%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Sohu.com better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Sohu.com (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport 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.
