With 20% ownership in Sun Corporation (TSE:6736), hedge funds investors have a lot riding on the business

Key Insights

• Significantly high institutional ownership implies Sun's stock price is sensitive to their trading actions
• A total of 3 investors have a majority stake in the company with 58% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Sun Corporation (TSE:6736) can tell us which group is most powerful. The group holding the most number of shares in the company, around 20% to be precise, is hedge funds. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, hedge funds investors ended up benefitting the most after the company hit JP¥182b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 282%.

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

Check out our latest analysis for Sun

What Does The Institutional Ownership Tell Us About Sun?

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 Sun. 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. 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 Sun's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 20% of Sun shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is Oasis Management Company Ltd. with 20% of shares outstanding. The second and third largest shareholders are Tokai Engineering Co., Ltd and True Wind Capital Management, L.P., with an equal amount of shares to their name at 19%.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 58% stake.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Sun

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.

We can see that insiders own shares in Sun Corporation. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around JP¥11b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sun. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 19%, private equity firms could influence the Sun board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 19%, 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 4.2% of the Sun shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. To that end, you should be aware of the 1 warning sign we've spotted with Sun .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.