Yahoo Movies After the recent decline, Arhaus, Inc. (NASDAQ:ARHS) CEO John Reed's holdings have lost 17% of their value
Key Insights
Significant insider control over Arhaus implies vested interests in company growth
58% of the business is held by the top 2 shareholders
If you want to know who really controls Arhaus, Inc. (NASDAQ:ARHS), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 34% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And following last week's 17% decline in share price, insiders suffered the most losses.
Let's take a closer look to see what the different types of shareholders can tell us about Arhaus.
See our latest analysis for Arhaus
What Does The Institutional Ownership Tell Us About Arhaus?
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 Arhaus does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Arhaus, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Arhaus. Looking at our data, we can see that the largest shareholder is the CEO John Reed with 32% of shares outstanding. The 2018 Reed Dynasty Trust is the second largest shareholder owning 26% of common stock, and Freeman Spogli Management Co., L.P. holds about 12% of the company stock.
A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 58% stake.
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 Arhaus
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. 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 most recent data indicates that insiders own a reasonable proportion of Arhaus, Inc.. It is very interesting to see that insiders have a meaningful US$486m stake in this US$1.4b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 13% 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.
Private Equity Ownership
With an ownership of 12%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Private Company Ownership
It seems that Private Companies own 30%, of the Arhaus stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Arhaus has 1 warning sign we think you should be aware of.
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.
