Recent uptick might appease First Foundation Inc. (NASDAQ:FFWM) institutional owners after losing 78% over the past year

Key Insights

• Institutions' substantial holdings in First Foundation implies that they have significant influence over the company's share price
• 51% of the business is held by the top 14 shareholders
• Recent sales by insiders

A look at the shareholders of First Foundation Inc. (NASDAQ:FFWM) can tell us which group is most powerful. The group holding the most number of shares in the company, around 72% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 19% increase in share prices after a year of 78% losses as a sign that returns are likely to begin trending higher.

Let's delve deeper into each type of owner of First Foundation, beginning with the chart below.

Check out 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. Hedge funds don't have many shares in First Foundation. FMR LLC is currently the largest shareholder, with 9.0% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.8% of common stock, and The Vanguard Group, Inc. holds about 4.9% of the company stock. Furthermore, CEO Scott Kavanaugh is the owner of 2.5% of the company's shares.

A closer look at our ownership figures suggests that the top 14 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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of First Foundation

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can see that insiders own shares in First Foundation Inc.. In their own names, insiders own US$25m worth of stock in the US$275m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 19% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for First Foundation (of which 2 make us uncomfortable!) you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.