Painful week for individual investors invested in Mitsubishi Pencil Co., Ltd. (TSE:7976) after 7.5% drop, institutions also suffered losses

Key Insights

• Significant control over Mitsubishi Pencil by individual investors implies that the general public has more power to influence management and governance-related decisions
• A total of 16 investors have a majority stake in the company with 50% ownership
• 47% of Mitsubishi Pencil is held by Institutions

To get a sense of who is truly in control of Mitsubishi Pencil Co., Ltd. (TSE:7976), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 47% 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.

Following a 7.5% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 47% stock also took a hit.

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

See our latest analysis for Mitsubishi Pencil

What Does The Institutional Ownership Tell Us About Mitsubishi Pencil?

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.

We can see that Mitsubishi Pencil does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Mitsubishi Pencil, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Mitsubishi Pencil. Our data shows that Sumitomo Mitsui Trust Asset Management Co., Ltd. is the largest shareholder with 8.7% of shares outstanding. For context, the second largest shareholder holds about 6.5% of the shares outstanding, followed by an ownership of 5.4% by the third-largest shareholder. Furthermore, CEO Shigehiko Suhara is the owner of 0.7% of the company's shares.

After doing some more digging, we found that the top 16 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Mitsubishi Pencil

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 Mitsubishi Pencil Co., Ltd.. It has a market capitalization of just JP¥124b, and insiders have JP¥2.2b 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 47% stake in Mitsubishi Pencil. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Mitsubishi Pencil better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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