Sumitomo Pharma Co., Ltd.'s (TSE:4506) market cap surged JP¥25b last week, public companies who have a lot riding on the company were rewarded

Key Insights

• Significant control over Sumitomo Pharma by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is Sumitomo Chemical Company, Limited with a 52% stake
• 14% of Sumitomo Pharma is held by Institutions

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A look at the shareholders of Sumitomo Pharma Co., Ltd. (TSE:4506) can tell us which group is most powerful. With 54% stake, public companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies collectively scored the highest last week as the company hit JP¥359b market cap following a 7.6% gain in the stock.

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

View our latest analysis for Sumitomo Pharma

What Does The Institutional Ownership Tell Us About Sumitomo Pharma?

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.

As you can see, institutional investors have a fair amount of stake in Sumitomo Pharma. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Sumitomo Pharma, (below). Of course, keep in mind that there are other factors to consider, too.

Sumitomo Pharma is not owned by hedge funds. The company's largest shareholder is Sumitomo Chemical Company, Limited, with ownership of 52%. This implies that they have majority interest control of the future of the company. Nomura Asset Management Co., Ltd. is the second largest shareholder owning 3.6% of common stock, and Nissay Asset Management Corporation holds about 1.9% of the company stock.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Sumitomo Pharma

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that Sumitomo Pharma Co., Ltd. insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own JP¥109m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sumitomo Pharma. 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.

Public Company Ownership

It appears to us that public companies own 54% of Sumitomo Pharma. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sumitomo Pharma better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sumitomo Pharma (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

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.