Yahoo Finance JD.com, Inc.'s (NASDAQ:JD) recent 13% pullback adds to one-year year losses, institutional owners may take drastic measures
Key Insights
Given the large stake in the stock by institutions, JD.com's stock price might be vulnerable to their trading decisions
The top 25 shareholders own 42% of the company
To get a sense of who is truly in control of JD.com, Inc. (NASDAQ:JD), it is important to understand the ownership structure of the business. With 40% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And institutional investors saw their holdings value drop by 13% last week. The recent loss, which adds to a one-year loss of 6.0% for stockholders, may not sit well with this group of investors. 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 JD.com, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of JD.com, beginning with the chart below.
View our latest analysis for JD.com
What Does The Institutional Ownership Tell Us About JD.com?
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 JD.com. 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. 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 JD.com's historic earnings and revenue below, but keep in mind there's always more to the story.
JD.com is not owned by hedge funds. Our data suggests that Qiangdong Liu, who is also the company's Top Key Executive, holds the most number of shares at 11%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Walmart Inc. is the second largest shareholder owning 9.4% of common stock, and The Vanguard Group, Inc. holds about 3.1% of the company stock.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 JD.com
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.
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.
It seems insiders own a significant proportion of JD.com, Inc.. It has a market capitalization of just US$46b, and insiders have US$5.0b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over JD.com. 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.
Public Company Ownership
Public companies currently own 9.4% of JD.com 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 JD.com better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for JD.com 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.
