Key Insights

• Significantly high institutional ownership implies Daqo New Energy's stock price is sensitive to their trading actions
• A total of 9 investors have a majority stake in the company with 53% ownership
• 29% of Daqo New Energy is held by insiders

If you want to know who really controls Daqo New Energy Corp. (NYSE:DQ), 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 57% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$195m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 51% 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 downtrend continues, institutions may face pressures to sell Daqo New Energy, which might have negative implications on individual investors.

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

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 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. In comparison, the second and third largest shareholders hold about 9.3% and 7.2% of the stock. Interestingly, the second-largest shareholder, Xiang Xu is also Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

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

Insider Ownership Of Daqo New Energy

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 information suggests that insiders maintain a significant holding in Daqo New Energy Corp.. Insiders own US$391m worth of shares in the US$1.4b company. That's quite meaningful. 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, who are usually individual investors, hold a 14% stake in Daqo New Energy. 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. For example, we've discovered 2 warning signs for Daqo New Energy that you should be aware of before investing here.

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.