Institutional owners may consider drastic measures as Socionext Inc.'s (TSE:6526) recent JP¥19b drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Socionext implies that they have significant influence over the company's share price
• 50% of the business is held by the top 20 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Socionext Inc. (TSE:6526), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 53% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by JP¥19b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 1.7% 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. As a result, if the decline continues, institutional investors may be pressured to sell Socionext which might hurt individual investors.

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

See our latest analysis for Socionext

What Does The Institutional Ownership Tell Us About Socionext?

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 Socionext. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Socionext'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. Hedge funds don't have many shares in Socionext. Looking at our data, we can see that the largest shareholder is Nomura Asset Management Co., Ltd. with 7.8% of shares outstanding. With 5.2% and 5.1% of the shares outstanding respectively, Principal Global Investors, LLC and BlackRock, Inc. are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Socionext

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.

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 most recent data indicates that insiders own less than 1% of Socionext Inc.. Keep in mind that it's a big company, and the insiders own JP¥537m worth of shares. The absolute value might be more important than the proportional share. 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 47% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Socionext. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Socionext better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Socionext .

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.