The big shareholder groups in China Online Education Group (NYSE:COE) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes “a business with enduring competitive advantages that is run by able and owner-oriented people.” So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
China Online Education Group is not a large company by global standards. It has a market capitalization of US$603m, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about China Online Education Group.
See our latest analysis for China Online Education Group
What Does The Institutional Ownership Tell Us About China Online Education Group?
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.
China Online Education Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of China Online Education Group, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don’t have a meaningful investment in China Online Education Group. DCM Ventures is currently the largest shareholder, with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 13% and 13%, of the shares outstanding, respectively. Jiajia Huang, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
Our research also brought to light the fact that roughly 58% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of China Online Education Group
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.
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.
It seems insiders own a significant proportion of China Online Education Group. Insiders own US$112m worth of shares in the US$603m company. I 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
The general public holds a 12% stake in China Online Education Group. 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 45% stake in China Online Education Group. 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
It appears to us that public companies own 7.3% of China Online Education Group. 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.
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. For instance, we’ve identified 2 warning signs for China Online Education Group that you should be aware of.
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.
This article by Simply Wall St is general in nature. 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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