Institutional owners may consider drastic measures as Nitto Denko Corporation's (TSE:6988) recent JP¥99b drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Nitto Denko implies that they have significant influence over the company's share price
• 51% of the business is held by the top 11 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

We check all companies for important risks. See what we found for Nitto Denko in our free report.

A look at the shareholders of Nitto Denko Corporation (TSE:6988) can tell us which group is most powerful. With 65% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by JP¥99b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 11% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Nitto Denko's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Nitto Denko

What Does The Institutional Ownership Tell Us About Nitto Denko?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Nitto Denko does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Nitto Denko's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Nitto Denko. Our data shows that Nomura Asset Management Co., Ltd. is the largest shareholder with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.4% and 5.7% of the stock.

After doing some more digging, we found that the top 11 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Nitto Denko

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Nitto Denko Corporation insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own JP¥1.2b worth of shares (at current prices). Arguably recent buying and selling is just as important to consider. You can click here to see if 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 Nitto Denko. 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 Nitto Denko better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.