Institutional investors control 48% of Formula Systems (1985) Ltd. (TLV:FORTY) and were rewarded last week after stock increased 5.1%

Key Insights

• Institutions' substantial holdings in Formula Systems (1985) implies that they have significant influence over the company's share price
• 52% of the business is held by the top 4 shareholders
• Insider ownership in Formula Systems (1985) is 12%

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To get a sense of who is truly in control of Formula Systems (1985) Ltd. (TLV:FORTY), 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. 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 ₪8.7b in market cap. The one-year return on investment is currently 69% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Formula Systems (1985).

View our latest analysis for Formula Systems (1985)

What Does The Institutional Ownership Tell Us About Formula Systems (1985)?

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.

Formula Systems (1985) 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 Formula Systems (1985)'s historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Formula Systems (1985). The company's largest shareholder is Asseco Poland S.A., with ownership of 26%. In comparison, the second and third largest shareholders hold about 12% and 7.7% of the stock. Guy Bernstein, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Formula Systems (1985)

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Formula Systems (1985) Ltd.. It is very interesting to see that insiders have a meaningful ₪1.1b stake in this ₪8.7b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Formula Systems (1985). 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.

Public Company Ownership

Public companies currently own 26% of Formula Systems (1985) stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.