In the wake of First Foundation Inc.'s (NASDAQ:FFWM) latest US$393m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Significantly high institutional ownership implies First Foundation's stock price is sensitive to their trading actions
51% of the business is held by the top 13 shareholders
If you want to know who really controls First Foundation Inc. (NASDAQ:FFWM), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 64% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, institutional investors endured the highest losses last week after market cap fell by US$393m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 69% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell First Foundation which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about First Foundation.
View our latest analysis for First Foundation
What Does The Institutional Ownership Tell Us About First Foundation?
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.
First Foundation already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 First Foundation's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 6.0% of First Foundation shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is FMR LLC, with ownership of 9.0%. Meanwhile, the second and third largest shareholders, hold 7.9% and 6.0%, of the shares outstanding, respectively. In addition, we found that Scott Kavanaugh, the CEO has 2.5% of the shares allocated to their name.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of First Foundation
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 insiders maintain a significant holding in First Foundation Inc.. It has a market capitalization of just US$437m, and insiders have US$45m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 20% 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.
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. Be aware that First Foundation is showing 4 warning signs in our investment analysis , and 1 of those can't be ignored...
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.
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.
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