In the wake of Nihon Kohden Corporation's (TSE:6849) latest JP¥20b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in Nihon Kohden implies that they have significant influence over the company's share price
• 51% of the business is held by the top 14 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Nihon Kohden Corporation (TSE:6849) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 61% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by JP¥20b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 12% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Nihon Kohden, 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 Nihon Kohden.

See our latest analysis for Nihon Kohden

What Does The Institutional Ownership Tell Us About Nihon Kohden?

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.

We can see that Nihon Kohden 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. 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 Nihon Kohden's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Nihon Kohden is not owned by hedge funds. Sprucegrove Investment Management Ltd is currently the company's largest shareholder with 13% of shares outstanding. With 5.0% and 3.6% of the shares outstanding respectively, Resona Bank Ltd., Asset Management Arm and Nomura Asset Management Co., Ltd. are the second and third largest shareholders.

After doing some more digging, we found that the top 14 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Nihon Kohden

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.

Our information suggests that Nihon Kohden Corporation insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own JP¥605m worth of shares. It is always good to see at least some insider ownership, 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 39% stake in Nihon Kohden. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Nihon Kohden better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Nihon Kohden .

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.