Every investor in Southern First Bancshares, Inc. (NASDAQ:SFST) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’
Southern First Bancshares is not a large company by global standards. It has a market capitalization of US$284m, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about SFST.
What Does The Institutional Ownership Tell Us About Southern First Bancshares?
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 Southern First Bancshares does have institutional investors; and they hold 65% of the stock. 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 Southern First Bancshares’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don’t have many shares in Southern First Bancshares. 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 Southern First Bancshares
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 Southern First Bancshares, Inc.. It has a market capitalization of just US$284m, and insiders have US$22m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 21% stake in SFST. 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
Private equity firms hold a 6.0% stake in SFST. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.