Yatsen Holding Limited (NYSE:YSG) Share Price Falls 16% Last Week; private equity firms would not be satisfied

A look at the shareholders of Yatsen Holding Limited (NYSE: YSG) can tell us which group is more powerful. The group holding the largest number of shares in the company, around 37% to be precise, are the private equity firms. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

While holdings of private equity firms took a hit after prices fell 16% last week, insiders with their 35% also suffered.

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

Discover our latest analysis for Yatsen Holding

NYSE: YSG Ownership Breakdown August 22, 2022

What does institutional ownership tell us about Yatsen Holding?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Yatsen Holding already has institutions registered in the share register. Indeed, they hold a respectable stake in the company. This may indicate that the company has some degree of credibility in the investment community. However, it is best to be wary of relying on the so-called validation that accompanies institutional investors. They are also sometimes wrong. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see Yatsen Holding’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
NYSE: YSG Earnings and Revenue Growth August 22, 2022

We note that hedge funds have no significant investment in Yatsen Holding. Looking at our data, we can see that the largest shareholder is CEO Jinfeng Huang with 27% of shares outstanding. For context, the second shareholder owns approximately 19% of the outstanding shares, followed by an 8.8% ownership by the third shareholder.

After digging a little deeper, we found that the top 3 shareholders collectively control more than half of the company’s stock, implying that they have considerable power to influence company decisions.

While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. There are plenty of analysts covering the stock, so it might be interesting to see what they are predicting as well.

Insider ownership of Yatsen Holding

The definition of company insiders can be subjective and varies from jurisdiction to jurisdiction. Our data reflects individual insiders, capturing at least board members. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.

Most view insider ownership as a positive because it can indicate that the board is well aligned with other shareholders. However, there are times when too much power is concentrated within this group.

It appears that insiders hold a large share of Yatsen Holding Limited. Insiders hold a $223 million stake in the $644 million business. We would say this shows alignment with shareholders, but it should be noted that the company is still quite small; some insiders may have founded the company. You can click here to see if these insiders have been buying or selling.

General public property

The general public, including retail investors, owns 18% of the company’s capital and therefore cannot be easily ignored. While this size of ownership may not be enough to sway a policy decision in their favor, they can still have a collective impact on company policies.

Private equity ownership

With a 37% stake, private equity firms are able to play a role in shaping corporate strategy with a focus on value creation. This might appeal to some, because private equity is sometimes an activist who holds management accountable. But other times, the private equity sells off, after taking the company public.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors. Like risks, for example. Every business has them, and we’ve spotted 2 warning signs for Yatsen Holding (of which 1 is worrying!) that you should know about.

If you’re like me, you might want to ask yourself if this business will grow or shrink. Luckily, you can check out this free report showing analyst predictions for its future.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Karen J. Nelson