Could Heritage Commerce Corp’s (NASDAQ:HTBK) Investor Composition Influence The Stock Price?

Every investor in Heritage Commerce Corp (NASDAQ:HTBK) 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. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of US$562m, Heritage Commerce is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about HTBK.

View our latest analysis for Heritage Commerce

NasdaqGS:HTBK Ownership Summary, March 17th 2019
NasdaqGS:HTBK Ownership Summary, March 17th 2019

What Does The Institutional Ownership Tell Us About Heritage Commerce?

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.

Heritage Commerce already has institutions on the share registry. Indeed, they own 74% of the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Heritage Commerce, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:HTBK Income Statement, March 17th 2019
NasdaqGS:HTBK Income Statement, March 17th 2019

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 Heritage Commerce. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Heritage Commerce

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. 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.

Our most recent data indicates that insiders own some shares in Heritage Commerce Corp. In their own names, insiders own US$22m worth of stock in the US$562m 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, with a 22% stake in the company, will not 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Heritage Commerce better, we need to consider many other factors.

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 .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.