To get a sense of who is truly in control of NIO Inc. (NYSE:NIO), it is important to understand the ownership structure of the business. With 48% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
While individual investors were the group that benefitted the most from last week’s US$1.9b market cap gain, institutions too had a 34% share in those profits.
In the chart below, we zoom in on the different ownership groups of NIO.
See our latest analysis for NIO
What Does The Institutional Ownership Tell Us About NIO?
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 NIO. 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 NIO’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in NIO. The company’s CEO William Li is the largest shareholder with 10% of shares outstanding. With 8.2% and 5.9% of the shares outstanding respectively, Tencent Holdings Limited and Baillie Gifford & Co. are the second and third largest shareholders.
Our studies suggest that the top 25 shareholders collectively control less than half of the company’s shares, meaning that the company’s shares are widely disseminated and there is no dominant shareholder.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of NIO
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.
It seems insiders own a significant proportion of NIO Inc.. It is very interesting to see that insiders have a meaningful US$1.8b stake in this US$18b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 48% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NIO. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Public Company Ownership
Public companies currently own 8.2% of NIO 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. To that end, you should be aware of the 2 warning signs we’ve spotted with NIO .
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here