Unusual move on the stock exchange: The company is suing its largest shareholder
On one side is Shapir Engineering, the controlling shareholder that appointed the management and wants to raise the CEO's salary. On the other side is Gabi Magnazi, the former controlling shareholder who remained with 28.3% and defeats every vote. In the middle: a company without a legal board of directors, which is now turning to the court. What is happening at Averot and what does it mean for the stock?
At Averot Industries, which deals with coating and wrapping steel pipes, manufacturing plastic pipes, and water and sewage infrastructure, a corporate conflict has been ongoing for a long time. Now it is reaching a new peak: a lawsuit filed by the company itself against its second-largest shareholder. To understand the major conflict in the company, one must first know the players.
The first camp: Shapir and the management. The public company Shapir Engineering (traded at a market value of about 16.1 billion shekels) acquired control of Averot in 2021 and currently holds about 54.85% of the shares. It effectively appointed the current management: CEO Alex Kagan, who took office in March 2023, and Chairman Michael Dayan.
When it is written that "the company" did or requested something, in practice it refers to the board of directors and management controlled by Shapir. This camp initiated the compensation policy, the salary increase for the CEO, and the appointment of external directors from the list of the Association of Directors.
The second camp: Gabi Magnazi. The former controlling shareholder, who sold the company to Shapir and remained with about 28.3% of the shares. Since his holding constitutes more than half of the public shares, and since the appointment of an external director requires by law a majority among minority shareholders as well, Magnazi can single-handedly defeat any appointment of an external director and any decision that requires a special majority. And that is exactly what he does, again and again.
Magnazi systematically votes against almost everything the company brings for approval: he defeated the extension of the term of an incumbent external director, thwarted six different candidates proposed by a search committee, defeated the compensation policy in April, and also defeated the salary increase for CEO Kagan from 50 thousand shekels per month to 60 thousand. The result: the company has been operating for more than a year with only one external director, contrary to the law requiring two.
Last September, the Economic Court intervened and determined that Magnazi violated his duty of fairness towards the company. Judge Ariel Zimmerman imposed a compromise outline: the Association of Directors will propose five neutral candidates, Shapir will be able to disqualify two, Magnazi will disqualify two, and the remaining ones will be put to a vote.
Shapir did disqualify two, Magnazi waived his right to disqualify — but then, a few days before the meeting, he made a different move: he and other shareholders added three of their own candidates to the agenda. That is, Magnazi proposed directors on his behalf, but only as a counter-move to the neutral candidates, not as part of the outline.
The meeting held this week ended in a deadlock: Magnazi defeated the three Association candidates with 85% of the minority votes, despite support from almost 68% of all voters. Shapir defeated Magnazi's three candidates with its general majority, even though the minority supported them by 85%. No one was appointed, and the CEO's salary was defeated again.
Facing Magnazi's obstruction, the management uses its tools. The compensation policy that was defeated in April was approved by the board anyway in June, in an "overruling" procedure that the law allows. An identical move was made in 2023 with Kagan's employment terms. And in January of this year, the company sued Magnazi for a debt of about 2.1 million shekels for goods, rent, and property tax.
Now the most dramatic step has arrived: a day after the meeting, Averot filed a lawsuit and an urgent request to the Economic Court, demanding to determine that Magnazi voted out of extraneous considerations while violating the duty of fairness — and therefore his votes should be deleted from the vote.
If the court grants the request, the Association of Directors' candidates will be considered approved without Magnazi's votes.
Magnazi's past has considerable weight in this story. In December 2025, in parallel with the struggle taking place at Averot, another affair came to an end: Magnazi confessed and was convicted as part of a plea bargain for fraud offenses, tax offenses, and offenses under the Competition Law. The Central District Court sentenced him to 22 months of actual imprisonment, and the Magnazi B.G.M. company under his control was ordered to forfeit 22 million shekels to the state treasury. The indictment revealed that Magnazi and his companies coordinated bids in large tenders to control the identity of the winners, and that the companies maintained a bank account worth tens of millions of shekels without declaring the beneficiaries, contrary to the Anti-Money Laundering Law.
And what does all this mean for investors? Averot is traded at a market value of about 187 million shekels. A company without a legal board composition, with ongoing legal expenses and managerial uncertainty, is a risk that is difficult to price. On the other hand, a judicial decision that breaks the paralysis may remove a cloud over the stock. The ball is in the court's court.
