NCD Co., Ltd.'s (TSE:4783) market cap dropped JP¥2.7b last week; Individual investors bore the brunt

Key Insights

• The considerable ownership by individual investors in NCD indicates that they collectively have a greater say in management and business strategy
• A total of 17 investors have a majority stake in the company with 47% ownership
• Insiders own 17% of NCD

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To get a sense of who is truly in control of NCD Co., Ltd. (TSE:4783), it is important to understand the ownership structure of the business. With 54% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 13% price drop, insiders with their 17% also suffered.

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

See our latest analysis for NCD

What Does The Institutional Ownership Tell Us About NCD?

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 NCD. 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 NCD, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in NCD. Our data shows that Hikari Tsushin, Inc. is the largest shareholder with 12% of shares outstanding. Ascender Capital Limited is the second largest shareholder owning 6.9% of common stock, and HOKUTO.CO.,LTD holds about 5.3% of the company stock. Furthermore, CEO Osamu Shimojo is the owner of 3.5% of the company's shares.

On studying our ownership data, we found that 17 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of NCD

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.

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.

It seems insiders own a significant proportion of NCD Co., Ltd.. Insiders have a JP¥3.2b stake in this JP¥18b business. 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, mostly comprising of individual investors, collectively holds 54% of NCD shares. 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.

Private Company Ownership

Our data indicates that Private Companies hold 5.3%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 12% of the NCD 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. Case in point: We've spotted 1 warning sign for NCD you should be aware of.

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.