Institutions along with public companies who hold considerable shares inMagic Software Enterprises Ltd. (NASDAQ:MGIC) come under pressure; lose 7.4% of holdings value

By
Simply Wall St
Published
December 02, 2021
NasdaqGS:MGIC
Source: Shutterstock

If you want to know who really controls Magic Software Enterprises Ltd. (NASDAQ:MGIC), then you'll have to look at the makeup of its share registry. With 45% stake, public companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of public companies took a hit after last week’s 7.4% price drop, institutions with their 31% holdings also suffered.

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

See our latest analysis for Magic Software Enterprises

ownership-breakdown
NasdaqGS:MGIC Ownership Breakdown December 3rd 2021

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.

As you can see, institutional investors have a fair amount of stake in Magic Software Enterprises. 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 Magic Software Enterprises' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:MGIC Earnings and Revenue Growth December 3rd 2021

Hedge funds don't have many shares in Magic Software Enterprises. Our data shows that Formula Systems (1985) Ltd. is the largest shareholder with 45% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.1% and 4.9% of the stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Magic Software Enterprises Ltd. insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around US$4.6m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in Magic Software Enterprises. 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 45% 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Magic Software Enterprises is showing 1 warning sign in our investment analysis , you should know about...

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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