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. We can see that individual insiders own the lion's share in the company with 30% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, insiders scored the highest last week as the company hit US$25b market cap following a 3.8% gain in the stock.
In the chart below, we zoom in on the different ownership groups of 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.
Li Auto 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 Li Auto's historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
We note that hedge funds don't have a meaningful investment in Li Auto. With a 23% stake, CEO Xiang Li is the largest shareholder. Meituan is the second largest shareholder owning 13% of common stock, and Xing Wang holds about 6.1% of the company stock. 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.
On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Li Auto
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that insiders maintain a significant holding in Li Auto Inc.. It is very interesting to see that insiders have a meaningful US$7.7b stake in this US$25b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Li Auto. 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.
Private Company Ownership
It seems that Private Companies own 3.9%, of the Li Auto stock. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Li Auto you should know about.
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.
