LOTTE Fine Chemical Co., Ltd.'s (KRX:004000) largest shareholders are public companies who were rewarded as market cap surged ₩146b last week

Key Insights

• Significant control over LOTTE Fine Chemical by public companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 55% of the company
• Institutional ownership in LOTTE Fine Chemical is 27%

To get a sense of who is truly in control of LOTTE Fine Chemical Co., Ltd. (KRX:004000), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 44% to be precise, is public companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies collectively scored the highest last week as the company hit ₩1.3t market cap following a 13% gain in the stock.

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

Check out our latest analysis for LOTTE Fine Chemical

What Does The Institutional Ownership Tell Us About LOTTE Fine Chemical?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

LOTTE Fine Chemical already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 LOTTE Fine Chemical's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in LOTTE Fine Chemical. The company's largest shareholder is Lotte Chemical Corporation, with ownership of 44%. National Pension Service is the second largest shareholder owning 11% of common stock, and Hermes Investment Management Limited holds about 5.1% of the company stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 55% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of LOTTE Fine Chemical

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.

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 LOTTE Fine Chemical Co., Ltd. insiders own under 1% of the company. It seems the board members have no more than ₩442m worth of shares in the ₩1.3t company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LOTTE Fine Chemical. 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

Public companies currently own 44% of LOTTE Fine Chemical stock. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand LOTTE Fine Chemical better, we need to consider many other factors. Be aware that LOTTE Fine Chemical is showing 2 warning signs in our investment analysis , you should know about...

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.

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.