Yahoo Finance Li Auto Inc.'s (NASDAQ:LI) most bullish insider, CEO Xiang Li must be pleased with the recent 14% gain
Key Insights
Li Auto's significant insider ownership suggests inherent interests in company's expansion
The top 6 shareholders own 51% of the company
To get a sense of who is truly in control of Li Auto Inc. (NASDAQ:LI), it is important to understand the ownership structure of the business. With 31% stake, individual insiders possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Clearly, insiders benefitted the most after the company's market cap rose by US$4.3b last week.
In the chart below, we zoom in on the different ownership groups of Li Auto.
See our latest analysis for Li Auto
What Does The Institutional Ownership Tell Us About Li Auto?
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.
As you can see, institutional investors have a fair amount of stake in Li Auto. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Li Auto's earnings history below. Of course, the future is what really matters.
Hedge funds don't have many shares in Li Auto. With a 23% stake, CEO Xiang Li is the largest shareholder. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 6.3% by the third-largest shareholder. Interestingly, the third-largest shareholder, Xing Wang is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.
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.
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 Li Auto
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 Li Auto Inc.. It is very interesting to see that insiders have a meaningful US$10b stake in this US$33b business. 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 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Li Auto. 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 Company Ownership
We can see that Private Companies own 3.9%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
It appears to us that public companies own 13% of Li Auto. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Li Auto better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Li Auto 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.
