PI Global Investments
Hedge Funds

Private equity firms in Smart Share Global Limited (NASDAQ:EM) are its biggest bettors, and their bets paid off as stock gained 12% last week

NasdaqGS:EM

Every investor in Smart Share Global Limited (NASDAQ:EM) should be aware of the most powerful shareholder groups. We can see that private equity firms own the lion’s share in the company with 39% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms were the biggest beneficiaries of last week’s 12% gain.

In the chart below, we zoom in on the different ownership groups of Smart Share Global.

View our latest analysis for Smart Share Global

ownership-breakdown
NasdaqGS:EM Ownership Breakdown July 21st 2022

What Does The Institutional Ownership Tell Us About Smart Share Global?

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.

As you can see, institutional investors have a fair amount of stake in Smart Share Global. 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. 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 Smart Share Global’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
NasdaqGS:EM Earnings and Revenue Growth July 21st 2022

Smart Share Global is not owned by hedge funds. Alibaba Group Holding Limited is currently the largest shareholder, with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 8.2% of the stock. Mars Guangyuan Cai, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Smart Share Global

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Smart Share Global Limited. It has a market capitalization of just US$316m, and insiders have US$54m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Smart Share Global. 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 an ownership of 39%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

We can see that public companies hold 22% of the Smart Share Global shares on issue. 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 Smart Share Global better, we need to consider many other factors. For instance, we’ve identified 1 warning sign for Smart Share Global that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

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