Key Insights

• Institutions' substantial holdings in Zai Lab implies that they have significant influence over the company's share price
• 51% of the business is held by the top 9 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Zai Lab Limited (NASDAQ:ZLAB) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 79% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 4.4% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 40% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Zai Lab which might hurt individual investors.

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

What Does The Institutional Ownership Tell Us About Zai Lab?

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.

Zai Lab 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Zai Lab's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Zai Lab. Our data shows that Wellington Management Group LLP is the largest shareholder with 11% of shares outstanding. The second and third largest shareholders are Qiming Weichuang Venture Capital Management (Shanghai) Company Limited and Capital Research and Management Company, with an equal amount of shares to their name at 8.0%. Furthermore, CEO Ying Du is the owner of 1.1% of the company's shares.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Zai Lab

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Zai Lab Limited. This is a big company, so it is good to see this level of alignment. Insiders own US$41m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zai Lab. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 8.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

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 1 warning sign we've spotted with Zai Lab .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.