To get a sense of who is truly in control of Magic Software Enterprises Ltd. (NASDAQ:MGIC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is public companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And individual investors on the other hand have 28% ownership in the company.
Let’s delve deeper into each type of owner of Magic Software Enterprises, beginning with the chart below.
Check out our latest analysis for Magic Software Enterprises
What Does The Institutional Ownership Tell Us About Magic Software Enterprises?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Magic Software Enterprises 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. 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 Magic Software Enterprises’ historic earnings and revenue below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Magic Software Enterprises. Looking at our data, we can see that the largest shareholder is Formula Systems (1985) Ltd. with 46% of shares outstanding. For context, the second largest shareholder holds about 5.1% of the outstanding shares, followed by an ownership of 4.9% by the third-largest shareholder.
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 51% 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of Magic Software Enterprises
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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 information suggests that Magic Software Enterprises Ltd. insiders own under 1% of the company. It seems the board members have no more than US$4.0m worth of shares in the US$825m company. We generally like to see the board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 28% stake in Magic Software Enterprises. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Public Company Ownership
Public companies currently own 46% of Magic Software Enterprises stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Magic Software Enterprises 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.
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