Key Insights

• Significant control over Zhihu by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 6 investors have a majority stake in the company with 51% ownership
• 21% of Zhihu is held by insiders

If you want to know who really controls Zhihu Inc. (NYSE:ZH), then you'll have to look at the makeup of its share registry. With 28% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that benefitted the most from last week's US$64m market cap gain, insiders too had a 21% share in those profits.

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

What Does The Institutional Ownership Tell Us About Zhihu?

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.

We can see that Zhihu does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Zhihu, (below). Of course, keep in mind that there are other factors to consider, too.

Zhihu is not owned by hedge funds. Tencent Holdings Limited is currently the company's largest shareholder with 13% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 7.0% by the third-largest shareholder. Yuan Zhou, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We also observed that the top 6 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.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Zhihu

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. 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 most recent data indicates that insiders own a reasonable proportion of Zhihu Inc.. Insiders own US$72m worth of shares in the US$340m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zhihu. 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.

Private Equity Ownership

With an ownership of 12%, 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.

Public Company Ownership

Public companies currently own 20% of Zhihu stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Zhihu better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Zhihu you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.