Shimano Inc.'s (TSE:7309) recent 5.3% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, Shimano's stock price might be vulnerable to their trading decisions
• The top 19 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Shimano Inc. (TSE:7309), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 5.3% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 9.4% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Shimano, which might have negative implications on individual investors.

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

Check out our latest analysis for Shimano

What Does The Institutional Ownership Tell Us About Shimano?

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 Shimano. 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. 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 Shimano, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Shimano. Minato Kosan Co., Ltd. is currently the company's largest shareholder with 8.8% of shares outstanding. With 5.1% and 4.7% of the shares outstanding respectively, BlackRock, Inc. and First Eagle Investment Management, LLC are the second and third largest shareholders. In addition, we found that Yozo Shimano, the CEO has 0.8% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Shimano

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

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.

Our most recent data indicates that insiders own less than 1% of Shimano Inc.. But they may have an indirect interest through a corporate structure that we haven't picked up on. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own JP¥17b worth of shares. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shimano. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 11%, of the shares on issue. 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. For instance, we've identified 1 warning sign for Shimano that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.