share_log

XD Inc.'s (HKG:2400) Largest Shareholder, CEO Yimeng Huang Sees Holdings Value Fall by 6.6% Following Recent Drop

Simply Wall St ·  10/05/2023 06:20

Key Insights

  • Significant insider control over XD implies vested interests in company growth
  • 50% of the business is held by the top 4 shareholders
  • Institutional ownership in XD is 14%

If you want to know who really controls XD Inc. (HKG:2400), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 46% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to HK$6.7b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of XD.

View our latest analysis for XD

ownership-breakdown
SEHK:2400 Ownership Breakdown October 4th 2023

What Does The Institutional Ownership Tell Us About XD?

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 XD does have institutional investors; and they hold a good portion of the company's stock. 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 XD's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:2400 Earnings and Revenue Growth October 4th 2023

XD is not owned by hedge funds. With a 34% stake, CEO Yimeng Huang is the largest shareholder. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 2.4% by the third-largest shareholder. Interestingly, the second-largest shareholder, Yunjie Dai is also President, again, pointing towards strong insider ownership amongst the company's top shareholders.

On looking further, we found that 50% 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.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of XD

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own a reasonable proportion of XD Inc.. It has a market capitalization of just HK$6.7b, and insiders have HK$3.1b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 40% stake in XD. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
    Write a comment