Kyokuto Kaihatsu Kogyo Co.,Ltd.'s (TSE:7226) market cap dropped JP¥15b last week; individual investors who hold 54% were hit as were institutions

Key Insights

• Kyokuto Kaihatsu KogyoLtd's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 45% of the business is held by the top 25 shareholders
• Institutional ownership in Kyokuto Kaihatsu KogyoLtd is 29%

Every investor in Kyokuto Kaihatsu Kogyo Co.,Ltd. (TSE:7226) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 16% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 29% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Kyokuto Kaihatsu KogyoLtd.

Check out our latest analysis for Kyokuto Kaihatsu KogyoLtd

What Does The Institutional Ownership Tell Us About Kyokuto Kaihatsu KogyoLtd?

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 Kyokuto Kaihatsu KogyoLtd. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Kyokuto Kaihatsu KogyoLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Kyokuto Kaihatsu KogyoLtd. Our data shows that Strategic Capital, Inc. is the largest shareholder with 8.0% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.2% and 4.0% of the stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Kyokuto Kaihatsu KogyoLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in Kyokuto Kaihatsu Kogyo Co.,Ltd.. It has a market capitalization of just JP¥83b, and insiders have JP¥1.9b worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 54% stake in Kyokuto Kaihatsu KogyoLtd, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

With an ownership of 8.0%, 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.

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 2 warning signs for Kyokuto Kaihatsu KogyoLtd that you should be aware of.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com