SCSK Corporation's (TSE:9719) stock price dropped 4.9% last week; public companies would not be happy

Key Insights

• Significant control over SCSK by public companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the company is held by a single shareholder (Sumitomo Corporation)
• 16% of SCSK is held by Institutions

Every investor in SCSK Corporation (TSE:9719) should be aware of the most powerful shareholder groups. With 52% stake, public companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 4.9% decline in share price, public companies suffered the most losses.

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

Check out our latest analysis for SCSK

What Does The Institutional Ownership Tell Us About SCSK?

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 SCSK. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 SCSK, (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 SCSK. Sumitomo Corporation is currently the largest shareholder, with 51% of shares outstanding. This implies that they have majority interest control of the future of the company. In comparison, the second and third largest shareholders hold about 2.2% and 2.0% of the 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of SCSK

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 data suggests that insiders own under 1% of SCSK Corporation in their own names. Keep in mind that it's a big company, and the insiders own JP¥257m worth of shares. The absolute value might be more important than the proportional share. 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-- including retail investors -- own 30% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

We can see that public companies hold 52% of the SCSK shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.