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Sea Limited's (NYSE:SE) one-year returns climbed after last week's 13% gain, institutional investors must be happy

Key Insights

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

  • 51% of the business is held by the top 8 shareholders

  • 15% of Sea is held by insiders

If you want to know who really controls Sea Limited (NYSE:SE), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 54% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 13% last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 7.6%.

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

See our latest analysis for Sea

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Sea?

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 Sea 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. 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 Sea, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Sea. Tencent Holdings Limited is currently the largest shareholder, with 18% of shares outstanding. With 8.4% and 5.9% of the shares outstanding respectively, Xiaodong Li and Baillie Gifford & Co. are the second and third largest shareholders. Xiaodong Li, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We did some more digging and found that 8 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.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sea

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our most recent data indicates that insiders own a reasonable proportion of Sea Limited. Insiders own US$6.5b worth of shares in the US$42b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Sea. 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

Public companies currently own 18% of Sea stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Sea has 1 warning sign we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.