Recent uptick might appease Magnachip Semiconductor Corporation (NYSE:MX) institutional owners after losing 37% over the past year

Key Insights

• Institutions' substantial holdings in Magnachip Semiconductor implies that they have significant influence over the company's share price
• 51% of the business is held by the top 22 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Magnachip Semiconductor Corporation (NYSE:MX) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 63% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week's US$36m market cap gain would probably be appreciated by institutional investors, especially after a year of 37% losses.

In the chart below, we zoom in on the different ownership groups of Magnachip Semiconductor.

Check out our latest analysis for Magnachip Semiconductor

What Does The Institutional Ownership Tell Us About Magnachip Semiconductor?

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.

As you can see, institutional investors have a fair amount of stake in Magnachip Semiconductor. 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. 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 Magnachip Semiconductor, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Magnachip Semiconductor is not owned by hedge funds. Brookfield Corporation is currently the largest shareholder, with 7.4% of shares outstanding. For context, the second largest shareholder holds about 5.7% of the shares outstanding, followed by an ownership of 3.9% by the third-largest shareholder. Additionally, the company's CEO Young-Joon Kim directly holds 1.7% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 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 Magnachip Semiconductor

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.

Our most recent data indicates that insiders own some shares in Magnachip Semiconductor Corporation. In their own names, insiders own US$9.1m worth of stock in the US$195m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 32% stake in the company, and hence can't easily be ignored. 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.

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. For example, we've discovered 2 warning signs for Magnachip Semiconductor (1 is concerning!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com