Internet Initiative Japan Inc.'s (TSE:3774) market cap dropped JP¥23b last week; individual investors who hold 36% were hit as were institutions

Key Insights

• Internet Initiative Japan's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 11 shareholders own 51% of the company
• 30% of Internet Initiative Japan is held by Institutions

To get a sense of who is truly in control of Internet Initiative Japan Inc. (TSE:3774), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions, who own 30% shares weren’t spared from last week’s JP¥23b market cap drop, retail investors as a group suffered the maximum losses

In the chart below, we zoom in on the different ownership groups of Internet Initiative Japan.

Check out our latest analysis for Internet Initiative Japan

What Does The Institutional Ownership Tell Us About Internet Initiative Japan?

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.

We can see that Internet Initiative Japan does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Internet Initiative Japan's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Internet Initiative Japan. The company's largest shareholder is Nippon Telegraph and Telephone Corporation, with ownership of 12%. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder. Koichi Suzuki, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Internet Initiative Japan

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.

Shareholders would probably be interested to learn that insiders own shares in Internet Initiative Japan Inc.. 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¥34b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 36% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

We can see that public companies hold 27% of the Internet Initiative Japan 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.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.