Is AudioCodes Ltd.'s (NASDAQ:AUDC) Shareholder Ownership Skewed Towards Insiders?

By
Simply Wall St
Published
November 10, 2020
NasdaqGS:AUDC

If you want to know who really controls AudioCodes Ltd. (NASDAQ:AUDC), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

With a market capitalization of US$900m, AudioCodes is a decent size, so it is probably on the radar of institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about AudioCodes.

View our latest analysis for AudioCodes

ownership-breakdown
NasdaqGS:AUDC Ownership Breakdown November 10th 2020

What Does The Institutional Ownership Tell Us About AudioCodes?

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 AudioCodes does have institutional investors; and they hold a good portion of the company's stock. 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 AudioCodes' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:AUDC Earnings and Revenue Growth November 10th 2020

AudioCodes is not owned by hedge funds. The company's CEO Shabtai Adlersberg is the largest shareholder with 14% of shares outstanding. With 9.3% and 6.9% of the shares outstanding respectively, Leon Bialik and Morgan Stanley, Investment Banking and Brokerage Investments are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. 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 AudioCodes

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 AudioCodes Ltd.. Insiders own US$213m worth of shares in the US$900m company. I 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

With a 30% ownership, the general public have some degree of sway over AudioCodes. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Be aware that AudioCodes is showing 4 warning signs in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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. 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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