Toyo Engineering Corporation's (TSE:6330) stock price dropped 14% last week; private equity firms would not be happy

Key Insights

• The considerable ownership by private equity firms in Toyo Engineering indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 54% of the company
• Institutions own 22% of Toyo Engineering

If you want to know who really controls Toyo Engineering Corporation (TSE:6330), then you'll have to look at the makeup of its share registry. We can see that private equity firms own the lion's share in the company with 30% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 14% decline in share price, private equity firms suffered the most losses.

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

See our latest analysis for Toyo Engineering

What Does The Institutional Ownership Tell Us About Toyo Engineering?

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 Toyo Engineering. 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 Toyo Engineering'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 Toyo Engineering. Integral Corporation is currently the largest shareholder, with 30% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 15% and 8.8%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Toyo Engineering

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.

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.

Our information suggests that Toyo Engineering Corporation insiders own under 1% of the company. It seems the board members have no more than JP¥50m worth of shares in the JP¥39b company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Toyo Engineering. 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 Equity Ownership

Private equity firms hold a 30% stake in Toyo Engineering. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

Public companies currently own 25% of Toyo Engineering 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Toyo Engineering (1 shouldn't be ignored) that 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.

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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.