Sumitomo Chemical Company, Limited's (TSE:4005) market cap dropped JP¥26b last week; individual investors who hold 54% were hit as were institutions

Key Insights

• The considerable ownership by retail investors in Sumitomo Chemical Company indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 44% of the company
• Institutional ownership in Sumitomo Chemical Company is 44%

A look at the shareholders of Sumitomo Chemical Company, Limited (TSE:4005) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are retail investors with 54% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 44% came under pressure after market cap dropped to JP¥541b last week,retail investors took the most losses.

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

View our latest analysis for Sumitomo Chemical Company

What Does The Institutional Ownership Tell Us About Sumitomo Chemical Company?

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.

Sumitomo Chemical Company already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Sumitomo Chemical Company's historic earnings and revenue below, but keep in mind there's always more to the story.

Sumitomo Chemical Company is not owned by hedge funds. Sumitomo Mitsui Trust Asset Management Co., Ltd. is currently the largest shareholder, with 4.6% of shares outstanding. For context, the second largest shareholder holds about 4.5% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 Sumitomo Chemical Company

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.

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 Sumitomo Chemical Company, Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own JP¥528m worth of shares. The absolute value might be more important than the proportional share. 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 -- including retail investors -- own 54% of Sumitomo Chemical Company. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sumitomo Chemical Company better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Sumitomo Chemical Company you should know about.

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.