While institutions invested in Shibaura Mechatronics Corporation (TSE:6590) benefited from last week's 5.6% gain, individual investors stood to gain the most

Key Insights

• The considerable ownership by individual investors in Shibaura Mechatronics indicates that they collectively have a greater say in management and business strategy
• A total of 25 investors have a majority stake in the company with 48% ownership
• 43% of Shibaura Mechatronics is held by Institutions

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To get a sense of who is truly in control of Shibaura Mechatronics Corporation (TSE:6590), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that benefitted the most from last week’s JP¥12b market cap gain, institutions too had a 43% share in those profits.

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

See our latest analysis for Shibaura Mechatronics

What Does The Institutional Ownership Tell Us About Shibaura Mechatronics?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Shibaura Mechatronics 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. 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 Shibaura Mechatronics, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Shibaura Mechatronics. Shin-Etsu Chemical Co., Ltd. is currently the company's largest shareholder with 5.9% of shares outstanding. With 5.4% and 4.5% of the shares outstanding respectively, Morgan Stanley and Goldman Sachs Asset Management, L.P. are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Shibaura Mechatronics

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.

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 data suggests that insiders own under 1% of Shibaura Mechatronics Corporation in their own names. 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¥560m 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

The general public, who are usually individual investors, hold a substantial 51% stake in Shibaura Mechatronics, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Public Company Ownership

We can see that public companies hold 5.9% of the Shibaura Mechatronics shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shibaura Mechatronics , and understanding them should be part of your investment process.

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.