Could The First United Corporation (NASDAQ:FUNC) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
June 08, 2021
NasdaqGS:FUNC

Every investor in First United Corporation (NASDAQ:FUNC) 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.

First United is not a large company by global standards. It has a market capitalization of US$123m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about First United.

View our latest analysis for First United

ownership-breakdown
NasdaqGS:FUNC Ownership Breakdown June 9th 2021

What Does The Institutional Ownership Tell Us About First United?

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.

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

earnings-and-revenue-growth
NasdaqGS:FUNC Earnings and Revenue Growth June 9th 2021

Hedge funds don't have many shares in First United. Our data shows that BlackRock, Inc. is the largest shareholder with 6.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.6% and 4.9%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of First United

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in First United Corporation. As individuals, the insiders collectively own US$6.7m worth of the US$123m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public -- including retail investors -- own 56% of First United. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand First United better, we need to consider many other factors. For instance, we've identified 1 warning sign for First United that you should be aware of.

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.

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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. 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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