Individual investors are Heartseed Inc.'s (TSE:219A) biggest owners and were hit after market cap dropped JP¥6.9b

Key Insights

• Heartseed's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 8 investors have a majority stake in the company with 51% ownership
• Insider ownership in Heartseed is 31%

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To get a sense of who is truly in control of Heartseed Inc. (TSE:219A), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 47% to be precise, is individual investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders who own 31% came under pressure after market cap dropped to JP¥45b last week,individual investors took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Heartseed.

See our latest analysis for Heartseed

What Does The Lack Of Institutional Ownership Tell Us About Heartseed?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. Heartseed might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Heartseed. With a 14% stake, CEO Keiichi Fukuda is the largest shareholder. In comparison, the second and third largest shareholders hold about 10% and 6.9% of the stock.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Heartseed

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. 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.

It seems insiders own a significant proportion of Heartseed Inc.. Insiders own JP¥14b worth of shares in the JP¥45b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 47% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With a stake of 17%, private equity firms could influence the Heartseed board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

We can see that public companies hold 4.2% of the Heartseed shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Heartseed (of which 1 is a bit concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.