Institutions along with retail investors who hold considerable shares inDenka Company Limited (TSE:4061) come under pressure; lose 5.0% of holdings value

Key Insights

• The considerable ownership by retail investors in Denka indicates that they collectively have a greater say in management and business strategy
• 48% of the business is held by the top 25 shareholders
• Institutions own 45% of Denka

Every investor in Denka Company Limited (TSE:4061) should be aware of the most powerful shareholder groups. With 52% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 5.0% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 45% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Denka.

View our latest analysis for Denka

What Does The Institutional Ownership Tell Us About Denka?

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.

We can see that Denka does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Denka's earnings history below. Of course, the future is what really matters.

Denka is not owned by hedge funds. Our data shows that Nomura Asset Management Co., Ltd. is the largest shareholder with 6.1% of shares outstanding. With 5.3% and 3.9% of the shares outstanding respectively, Nikko Asset Management Co., Ltd. and The Vanguard Group, Inc. are the second and third largest shareholders.

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.

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

Insider Ownership Of Denka

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.

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 most recent data indicates that insiders own less than 1% of Denka Company Limited. Keep in mind that it's a big company, and the insiders own JP¥96m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 52% of Denka shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Denka (at least 1 which makes us a bit uncomfortable) , 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.