Key Insights

• The considerable ownership by public companies in Magic Software Enterprises indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 54% of the company
• Institutional ownership in Magic Software Enterprises is 19%

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. We can see that public companies own the lion's share in the company with 47% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, public companies collectively scored the highest last week as the company hit US$565m market cap following a 9.8% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Magic Software Enterprises.

What Does The Institutional Ownership Tell Us About Magic Software Enterprises?

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 Magic Software Enterprises. 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 Magic Software Enterprises, (below). Of course, keep in mind that there are other factors to consider, too.

Magic Software Enterprises is not owned by hedge funds. Formula Systems (1985) Ltd. is currently the largest shareholder, with 47% of shares outstanding. With 7.0% and 1.5% of the shares outstanding respectively, Clal Financial Management Ltd and Migdal Mutual Funds Ltd. are the second and third largest shareholders.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Magic Software Enterprises

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of Magic Software Enterprises Ltd.. It has a market capitalization of just US$565m, and the board has only US$2.2m worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 34% 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.

Public Company Ownership

We can see that public companies hold 47% of the Magic Software Enterprises 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:

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. Take risks for example - Magic Software Enterprises has 1 warning sign we think you should be aware of.

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. 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.