iDreamSky Technology Holdings Limited's (HKG:1119) last week's 14% decline must have disappointed individual investors who have a significant stake

Key Insights

• The considerable ownership by individual investors in iDreamSky Technology Holdings indicates that they collectively have a greater say in management and business strategy
• A total of 21 investors have a majority stake in the company with 45% ownership
• 18% of iDreamSky Technology Holdings is held by insiders

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To get a sense of who is truly in control of iDreamSky Technology Holdings Limited (HKG:1119), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 55% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders who own 18% came under pressure after market cap dropped to HK$1.2b last week,individual investors took the most losses.

Let's delve deeper into each type of owner of iDreamSky Technology Holdings, beginning with the chart below.

View our latest analysis for iDreamSky Technology Holdings

What Does The Institutional Ownership Tell Us About iDreamSky Technology Holdings?

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.

We can see that iDreamSky Technology Holdings does have institutional investors; and they hold a good portion of the company's stock. 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 iDreamSky Technology 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 iDreamSky Technology Holdings. With a 16% stake, CEO Xiangyu Chen is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 15% and 6.7%, of the shares outstanding, respectively.

Our studies suggest that the top 21 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of iDreamSky Technology Holdings

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems insiders own a significant proportion of iDreamSky Technology Holdings Limited. Insiders have a HK$229m stake in this HK$1.2b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 55% stake in iDreamSky Technology Holdings, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 6.7%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 15% of iDreamSky Technology Holdings stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand iDreamSky Technology Holdings better, we need to consider many other factors. Take risks for example - iDreamSky Technology Holdings has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.