Key Insights

• Given the large stake in the stock by institutions, JD.com's stock price might be vulnerable to their trading decisions
• 36% of the business is held by the top 25 shareholders
• Insider ownership in JD.com is 11%

Every investor in JD.com, Inc. (NASDAQ:JD) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 45% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by US$5.8b last week. However, the 44% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of JD.com.

Check out our latest analysis for JD.com

What Does The Institutional Ownership Tell Us About JD.com?

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 JD.com does have institutional investors; and they hold a good portion of the company's stock. 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 JD.com's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in JD.com. 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. In comparison, the second and third largest shareholders hold about 3.7% and 3.6% of the stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of JD.com

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 is very interesting to see that insiders have a meaningful US$6.1b stake in this US$54b 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 44% 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.

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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.