Key Insights

• Given the large stake in the stock by institutions, Zai Lab's stock price might be vulnerable to their trading decisions

• A total of 9 investors have a majority stake in the company with 51% ownership

• Insiders have been selling lately

Every investor in Zai Lab Limited (NASDAQ:ZLAB) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 77% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors would probably welcome last week's 5.0% increase in the share price after a year of 25% losses as a sign that returns may to begin trending higher.

Let's take a closer look to see what the different types of shareholders can tell us about Zai Lab.

View our latest analysis for Zai Lab

What Does The Institutional Ownership Tell Us About Zai Lab?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Zai Lab 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Zai Lab, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Zai Lab. Wellington Management Group LLP is currently the largest shareholder, with 9.0% of shares outstanding. Qiming Weichuang Venture Capital Management (Shanghai) Company Limited is the second largest shareholder owning 8.1% of common stock, and Janus Henderson Group plc holds about 6.8% of the company stock. Additionally, the company's CEO Ying Du directly holds 0.9% of the total shares outstanding.

We did some more digging and found that 9 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Zai Lab

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Zai Lab Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$30m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Zai Lab. 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 Equity Ownership

With a stake of 8.1%, private equity firms could influence the Zai Lab board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.