Private equity firms among Nippon Avionics Co., Ltd.'s (TSE:6946) largest shareholders, saw gain in holdings value after stock jumped 10% last week

Key Insights

• Significant control over Nippon Avionics by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 54% of the company is held by a single shareholder (Japan Industrial Partners, Inc.)
• Institutional ownership in Nippon Avionics is 13%

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Every investor in Nippon Avionics Co., Ltd. (TSE:6946) should be aware of the most powerful shareholder groups. With 54% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private equity firms benefitted the most after the company's market cap rose by JP¥5.9b last week.

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

Check out our latest analysis for Nippon Avionics

What Does The Institutional Ownership Tell Us About Nippon Avionics?

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

Nippon Avionics is not owned by hedge funds. Our data shows that Japan Industrial Partners, Inc. is the largest shareholder with 54% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 5.9% of the shares outstanding, followed by an ownership of 2.1% by the third-largest shareholder.

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. 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 Nippon Avionics

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 information suggests that Nippon Avionics Co., Ltd. insiders own under 1% of the company. It appears that the board holds about JP¥244m worth of stock. This compares to a market capitalization of JP¥64b. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nippon Avionics. 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.

Private Equity Ownership

With an ownership of 54%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Nippon Avionics better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Nippon Avionics you should be aware of.

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.

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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.