Key Insights

• Insiders appear to have a vested interest in XD's growth, as seen by their sizeable ownership
• A total of 4 investors have a majority stake in the company with 51% ownership
• Insiders have been buying lately

To get a sense of who is truly in control of XD Inc. (HKG:2400), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Insiders who purchased recently should be particularly happy after the stock gained 12% in the past week.

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

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 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 XD, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in XD. 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 2.7% 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.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of XD Inc.. It has a market capitalization of just HK$7.9b, and insiders have HK$3.6b worth of shares in their own names. That's quite significant. 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

The general public, who are usually individual investors, hold a 36% 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:

It's always worth thinking about the different groups who own shares in a company. But to understand XD better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with XD , 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 free report 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.

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.