Is Futu Holdings Limited's (NASDAQ:FUTU) Shareholder Ownership Skewed Towards Insiders?
Every investor in Futu Holdings Limited (NASDAQ:FUTU) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes “a business with enduring competitive advantages that is run by able and owner-oriented people.” So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of US$4.1b, Futu Holdings is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Futu Holdings.
Check out our latest analysis for Futu Holdings
What Does The Institutional Ownership Tell Us About Futu Holdings?
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.
Futu Holdings 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 Futu Holdings’ historic earnings and revenue below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Futu Holdings. The company’s CEO Leaf Li is the largest shareholder with 37% of shares outstanding. For context, the second largest shareholder holds about 28% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.
After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company’s shares, implying that they have considerable power to influence the company’s decisions.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Futu Holdings
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Futu Holdings Limited. It is very interesting to see that insiders have a meaningful US$1.6b stake in this US$4.1b 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 21% ownership, the general public have some degree of sway over Futu Holdings. 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.
Public Company Ownership
We can see that public companies hold 28% of the Futu Holdings shares on issue. 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 Futu Holdings better, we need to consider many other factors. For instance, we’ve identified 3 warning signs for Futu Holdings that you should be aware of.
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.
This article by Simply Wall St is general in nature. 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.
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