Key Insights

• Arhaus' significant insider ownership suggests inherent interests in company's expansion
• 58% of the business is held by the top 2 shareholders
• Institutions own 26% of Arhaus

Every investor in Arhaus, Inc. (NASDAQ:ARHS) should be aware of the most powerful shareholder groups. We can see that individual insiders own the lion's share in the company with 34% ownership. 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, insiders scored the highest last week as the company hit US$2.2b market cap following a 4.9% gain in the stock.

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

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.

Arhaus already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Arhaus' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Arhaus. With a 32% stake, CEO John Reed is the largest shareholder. The 2018 Reed Dynasty Trust is the second largest shareholder owning 26% of common stock, and The Reed 2013 Generation Skipping Trust holds about 4.0% 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.

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

Insider Ownership Of Arhaus

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 a reasonable proportion of Arhaus, Inc.. It is very interesting to see that insiders have a meaningful US$740m stake in this US$2.2b 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 10% stake in the company, and hence can't 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.

Private Company Ownership

Our data indicates that Private Companies hold 30%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Arhaus better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Arhaus you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.