Key Insights

• Given the large stake in the stock by institutions, Daqo New Energy's stock price might be vulnerable to their trading decisions
• A total of 11 investors have a majority stake in the company with 50% ownership
• Insider ownership in Daqo New Energy is 22%

To get a sense of who is truly in control of Daqo New Energy Corp. (NYSE:DQ), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 44% 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).

After a year of 28% losses, last week's 10% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let's delve deeper into each type of owner of Daqo New Energy, beginning with the chart below.

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.

As you can see, institutional investors have a fair amount of stake in Daqo New Energy. 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. 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 Daqo New Energy, (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 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. For context, the second largest shareholder holds about 9.3% of the shares outstanding, followed by an ownership of 8.5% by the third-largest shareholder. Interestingly, the second-largest shareholder, Xiang Xu is also Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Daqo New Energy Corp.. Insiders own US$283m worth of shares in the US$1.3b 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 34% stake in Daqo New Energy. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Daqo New Energy better, we need to consider many other factors. Take risks for example - Daqo New Energy has 1 warning sign we think you should be aware of.

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.

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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.