First Western Financial, Inc.'s (NASDAQ:MYFW) latest 14% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Institutions' substantial holdings in First Western Financial implies that they have significant influence over the company's share price
• The top 14 shareholders own 51% of the company
• Recent sales by insiders

To get a sense of who is truly in control of First Western Financial, Inc. (NASDAQ:MYFW), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 48% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$24m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 36% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in First Western Financial's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for First Western Financial

What Does The Institutional Ownership Tell Us About First Western Financial?

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.

As you can see, institutional investors have a fair amount of stake in First Western Financial. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Western Financial's historic earnings and revenue below, but keep in mind there's always more to the story.

First Western Financial is not owned by hedge funds. Our data shows that The Banc Funds Company, L.L.C. is the largest shareholder with 7.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 5.2% of the stock. Scott Wylie, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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.

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 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 Western Financial

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.

Our information suggests that insiders maintain a significant holding in First Western Financial, Inc.. It has a market capitalization of just US$169m, and insiders have US$25m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in First Western Financial. 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

With a stake of 7.9%, private equity firms could influence the First Western Financial board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

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.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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. 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.