Retail investors among Gakujo Co., Ltd.'s (TSE:2301) largest stockholders and were hit after last week's 14% price drop

Key Insights

• Significant control over Gakujo by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 9 investors have a majority stake in the company with 51% ownership
• 24% of Gakujo is held by Institutions

To get a sense of who is truly in control of Gakujo Co., Ltd. (TSE:2301), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 14% decline in share price, retail investors suffered the most losses.

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

See our latest analysis for Gakujo

What Does The Institutional Ownership Tell Us About Gakujo?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Gakujo already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Gakujo'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 Gakujo. Ambitious Co., Ltd. is currently the largest shareholder, with 16% of shares outstanding. The Asahi Shimbun Company is the second largest shareholder owning 11% of common stock, and Sumitomo Mitsui DS Asset Management Company, Limited holds about 4.9% of the company stock. In addition, we found that Taishi Nakai, the CEO has 3.2% of the shares allocated to their name.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Gakujo

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Gakujo Co., Ltd.. As individuals, the insiders collectively own JP¥920m worth of the JP¥22b company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 41% 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

Our data indicates that Private Companies hold 28%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 2 warning signs with Gakujo (at least 1 which is significant) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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