Key Insights

• Given the large stake in the stock by institutions, Daqo New Energy's stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 51% of the company
• Insiders own 30% of Daqo New Energy

A look at the shareholders of Daqo New Energy Corp. (NYSE:DQ) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week's US$196m market cap gain would probably be appreciated by institutional investors, especially after a year of 58% losses.

Let's take a closer look to see what the different types of shareholders can tell us about Daqo New Energy.

What Does The Institutional Ownership Tell Us About Daqo New Energy?

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.

Daqo New Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Daqo New Energy's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Daqo New Energy. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Daqo New Energy's case, its Top Key Executive, Guangfu Xu, is the largest shareholder, holding 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.4% and 7.9%, of the shares outstanding, respectively. Interestingly, the second-largest shareholder, Xiang Xu is also Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Daqo New Energy

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 information suggests that insiders maintain a significant holding in Daqo New Energy Corp.. It has a market capitalization of just US$1.5b, and insiders have US$446m worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Daqo New Energy better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Daqo New Energy .

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.