Recent uptick might appease Formula Systems (1985) Ltd. (TLV:FORTY) institutional owners after losing 13% over the past year

Key Insights

• Significantly high institutional ownership implies Formula Systems (1985)'s stock price is sensitive to their trading actions
• A total of 4 investors have a majority stake in the company with 53% ownership
• Insiders own 12% of Formula Systems (1985)

A look at the shareholders of Formula Systems (1985) Ltd. (TLV:FORTY) can tell us which group is most powerful. The group holding the most number of shares in the company, around 47% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's ₪201m market cap gain would probably be appreciated by institutional investors, especially after a year of 13% losses.

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.

We can see that Formula Systems (1985) does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Formula Systems (1985), (below). Of course, keep in mind that there are other factors to consider, too.

Formula Systems (1985) is not owned by hedge funds. Asseco Poland S.A. is currently the company's largest shareholder with 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 8.5%, of the shares outstanding, respectively. Guy Bernstein, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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. 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.

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.

It seems insiders own a significant proportion of Formula Systems (1985) Ltd.. Insiders have a ₪428m stake in this ₪3.6b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Formula Systems (1985). 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

We can see that public companies hold 26% of the Formula Systems (1985) shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.