EM Systems Co., Ltd.'s (TSE:4820) stock price dropped 11% last week; private companies would not be happy

Key Insights

• EM Systems' significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 2 investors have a majority stake in the company with 50% ownership
• 12% of EM Systems is held by Institutions

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A look at the shareholders of EM Systems Co., Ltd. (TSE:4820) can tell us which group is most powerful. The group holding the most number of shares in the company, around 38% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private companies as a group endured the highest losses last week after market cap fell by JP¥5.9b.

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

Check out our latest analysis for EM Systems

What Does The Institutional Ownership Tell Us About EM Systems?

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.

As you can see, institutional investors have a fair amount of stake in EM Systems. 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 EM Systems' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in EM Systems. Looking at our data, we can see that the largest shareholder is Kokko Co., Ltd. with 38% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 10%, of the shares outstanding, respectively. Furthermore, CEO Hiromasa Kunimitsu is the owner of 2.9% of the company's shares.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of EM Systems

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

We can report that insiders do own shares in EM Systems Co., Ltd.. In their own names, insiders own JP¥2.0b worth of stock in the JP¥49b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in EM Systems. 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 Equity Ownership

With a stake of 12%, private equity firms could influence the EM Systems board. 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.

Private Company Ownership

It seems that Private Companies own 38%, of the EM Systems stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

We can see that public companies hold 13% of the EM Systems shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Case in point: We've spotted 2 warning signs for EM Systems you should be aware of.

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.