Institutions profited after Mitsubishi Materials Corporation's (TSE:5711) market cap rose JP¥11b last week but retail investors profited the most

Key Insights

• Mitsubishi Materials' significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 42% of the company
• 41% of Mitsubishi Materials is held by Institutions

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To get a sense of who is truly in control of Mitsubishi Materials Corporation (TSE:5711), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 59% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Retail investors gained the most after market cap touched JP¥306b last week, while institutions who own 41% also benefitted.

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

View our latest analysis for Mitsubishi Materials

What Does The Institutional Ownership Tell Us About Mitsubishi Materials?

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 Mitsubishi Materials. 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 Mitsubishi Materials' historic earnings and revenue below, but keep in mind there's always more to the story.

Mitsubishi Materials is not owned by hedge funds. Our data shows that Silchester International Investors LLP is the largest shareholder with 6.5% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.0% and 4.1% of the stock.

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 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 Mitsubishi Materials

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

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.

Our information suggests that Mitsubishi Materials Corporation insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own JP¥144m 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, mostly comprising of individual investors, collectively holds 59% of Mitsubishi Materials 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. For example, we've discovered 2 warning signs for Mitsubishi Materials (1 is significant!) that you should be aware of before investing here.

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.