Institutional investors may adopt severe steps after SHIFT Inc.'s (TSE:3697) latest 4.7% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, SHIFT's stock price might be vulnerable to their trading decisions
• A total of 4 investors have a majority stake in the company with 55% ownership
• Insider ownership in SHIFT is 35%

Every investor in SHIFT Inc. (TSE:3697) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to JP¥265b last week after a 4.7% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 54% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell SHIFT, which might have negative implications on individual investors.

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

See our latest analysis for SHIFT

What Does The Institutional Ownership Tell Us About SHIFT?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in SHIFT. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at SHIFT's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in SHIFT. Looking at our data, we can see that the largest shareholder is the CEO Masaru Tange with 35% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.9% and 7.0% of the stock.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. 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 SHIFT

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 most recent data indicates that insiders own a reasonable proportion of SHIFT Inc.. Insiders own JP¥94b worth of shares in the JP¥265b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 26% 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that SHIFT is showing 2 warning signs in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.