In the wake of Nakanishi Inc.'s (TSE:7716) latest JP¥8.1b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in Nakanishi implies that they have significant influence over the company's share price
• A total of 14 investors have a majority stake in the company with 51% ownership
• 21% of Nakanishi is held by insiders

If you want to know who really controls Nakanishi Inc. (TSE:7716), then you'll have to look at the makeup of its share registry. With 38% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to JP¥218b last week after a 3.6% drop in the share price. The recent loss, which adds to a one-year loss of 21% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Nakanishi which might hurt individual investors.

Let's delve deeper into each type of owner of Nakanishi, beginning with the chart below.

See our latest analysis for Nakanishi

What Does The Institutional Ownership Tell Us About Nakanishi?

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 Nakanishi. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Nakanishi's earnings history below. Of course, the future is what really matters.

Nakanishi is not owned by hedge funds. From our data, we infer that the largest shareholder is Kensuke Nakanishi (who also holds the title of Other Key Executive) with 7.0% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. The second and third largest shareholders are Chiyo Nakanishi and Nakanishi E & N K.K., with an equal amount of shares to their name at 5.4%. Furthermore, CEO Eiichi Nakanishi is the owner of 3.3% of the company's shares.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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

Insider Ownership Of Nakanishi

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Nakanishi Inc.. It is very interesting to see that insiders have a meaningful JP¥46b stake in this JP¥218b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here 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 Nakanishi. 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

It seems that Private Companies own 5.4%, of the Nakanishi 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Nakanishi better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Nakanishi (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.