Key Insights

• The considerable ownership by retail investors in Meitu indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 49% of the company
• Insiders have been selling lately

A look at the shareholders of Meitu, Inc. (HKG:1357) can tell us which group is most powerful. The group holding the most number of shares in the company, around 50% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

While retail investors were the group that benefitted the most from last week's HK$3.9b market cap gain, insiders too had a 36% share in those profits.

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

What Does The Institutional Ownership Tell Us About Meitu?

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.

Meitu already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Meitu, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Meitu. Wen Sheng Cai is currently the largest shareholder, with 24% of shares outstanding. With 13% and 2.5% of the shares outstanding respectively, Zeyuan Wu and China Asset Management Co. Ltd. are the second and third largest shareholders. Zeyuan Wu, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Meitu

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. 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.

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 Meitu, Inc.. Insiders own HK$5.0b worth of shares in the HK$14b company. That's quite meaningful. 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 -- including retail investors -- own 50% of Meitu. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Meitu better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Meitu you should know about.

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.