Individual investors in Hi-Lex Corporation (TSE:7279) are its biggest bettors, and their bets paid off as stock gained 14% last week

Key Insights

• Hi-Lex's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 10 investors have a majority stake in the company with 51% ownership
• 23% of Hi-Lex is held by Institutions

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To get a sense of who is truly in control of Hi-Lex Corporation (TSE:7279), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 39% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, individual investors benefitted the most after the company's market cap rose by JP¥14b last week.

Let's delve deeper into each type of owner of Hi-Lex, beginning with the chart below.

Check out our latest analysis for Hi-Lex

What Does The Institutional Ownership Tell Us About Hi-Lex?

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 Hi-Lex 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. 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 Hi-Lex's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Hi-Lex. Teraura Kosan Co., Ltd. is currently the largest shareholder, with 28% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.2% and 3.4% of the stock. Furthermore, CEO Taro Teraura is the owner of 1.4% of the company's shares.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Hi-Lex

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. 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.

We can report that insiders do own shares in Hi-Lex Corporation. It has a market capitalization of just JP¥110b, and insiders have JP¥1.5b worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 39% stake in the company, and hence can't easily be ignored. 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.

Private Company Ownership

It seems that Private Companies own 28%, of the Hi-Lex stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 7.2% of Hi-Lex stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hi-Lex , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

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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.