Key Insights

• Given the large stake in the stock by institutions, First Foundation's stock price might be vulnerable to their trading decisions
• A total of 12 investors have a majority stake in the company with 50% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in First Foundation Inc. (NYSE:FFWM) should be aware of the most powerful shareholder groups. With 49% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit US$561m in market cap. The one-year return on investment is currently 27% and last week's gain would have been more than welcomed.

Let's take a closer look to see what the different types of shareholders can tell us about First Foundation.

What Does The Institutional Ownership Tell Us About First Foundation?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that First Foundation does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at First Foundation's earnings history below. Of course, the future is what really matters.

It looks like hedge funds own 13% of First Foundation shares. 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 Strategic Value Bank Partners LLC, with ownership of 10.0%. FMR LLC is the second largest shareholder owning 7.5% of common stock, and BlackRock, Inc. holds about 5.8% of the company stock. Furthermore, CEO Scott Kavanaugh is the owner of 2.1% of the company's shares.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 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 an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 report that insiders do own shares in First Foundation Inc.. In their own names, insiders own US$33m worth of stock in the US$561m 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 15% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for First Foundation that you should be aware of before investing here.

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.

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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.