Key Insights

• Significant insider control over Puyi implies vested interests in company growth
• 88% of the company is held by a single shareholder (Haifeng Yu)
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Puyi Inc. (NASDAQ:PUYI), then you'll have to look at the makeup of its share registry. We can see that individual insiders own the lion's share in the company with 88% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to US$139m last week, insiders would have faced the highest losses than any other shareholder groups of the company.

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

See our latest analysis for Puyi

What Does The Lack Of Institutional Ownership Tell Us About Puyi?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Puyi might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Puyi. Haifeng Yu is currently the largest shareholder, with 88% of shares outstanding. This implies that they have majority interest control of the future of the company. Rhumbline Advisers Ltd Partnership is the second largest shareholder owning 0.02% of common stock, and Geode Capital Management, LLC holds about 0.02% of the company stock.

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. 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 Puyi

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.

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.

It seems that insiders own more than half the Puyi Inc. stock. This gives them a lot of power. Given it has a market cap of US$139m, that means they have US$121m worth of shares. 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 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Puyi. 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 Puyi better, we need to consider many other factors. For instance, we've identified 3 warning signs for Puyi (2 are a bit concerning) that you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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. 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.