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Tech startups drive 100% jump in IPOs on Tel Aviv Stock Exchange
[TEL AVIV] Israeli startups are taking the Tel Aviv Stock Exchange by storm this year, pushing initial public offerings to a three-year high and marking a shift away from homegrown technology companies opting to list abroad.
Through October, 14 companies had conducted IPOs worth US$650 million in Tel Aviv this year, with eight of those tech or innovation-focused startups, according to data from the exchange. That's already double the total number of listings in 2019 and the most since 2017, with more tech offerings in the pipeline.
"We're considered all over the world as a startup nation, but essentially the Israeli exchange didn't participate in the new economy and high tech, and 2020 is the year of the breakthrough," said Hani Shitrit Bach, the TASE's head of listings.
Israel's main trading venue has struggled since a 2010 decision by index compiler MSCI Inc to upgrade the country from emerging market status, which led passive investors to withdraw funds given the country's lower weighting in the developed benchmark.
For years, Israel's most promising technology companies have forsaken their local market, opting to list instead only in New York or, less often, London. Mobileye NV raised US$890 million in the U.S. in 2014 and the company was bought by Intel Corp four years later. Wix.com Ltd, the maker of online tools to create websites, went public on Nasdaq in 2013 and now has a US$14.3 billion market value.
Some companies are still pursuing that route. Cybersecurity startup BrandShield Ltd will start trading on the London Stock Exchange's AIM segment next month. And remote-working firm Monday.com is eyeing a listing in New York at a possible US$4 billion value, Israeli business newspaper Calcalist reported in October.
Now, a series of reforms from the exchange and local regulators, like allowing companies to file in English and expanding dual-listing agreements, are starting to pay off. The government has also made moves to bolster the local tech sector, with the Innovation Authority offering domestic investors protection against potential losses. In August last year, the Tel Aviv bourse made its own debut, a step to inspire other businesses to follow suit.
Meanwhile, the Covid-19 outbreak shifted some of the dynamics of tech funding in the country this year. Foreign money dropped from a high at the end of 2019, while local investment jumped by mid-2020, according to a report by the IVC Research Center. And new listings have been supported by the Tel Aviv Stock Exchange 35 Index's partial recovery from lows in March, which has picked up pace in recent months.
Israeli IPOs have generally found plenty of takers this year. SaverOne 2014 Ltd, whose app prevents the use of mobile phones while driving, tested the market in June, with the stock more than doubling since. Green power projects firm Doral Renewable Energy Resources Ltd is up 86 per cent on its October listing price.
"For the first time in years, you've got to take the TASE seriously," said Jon Medved, chief executive of Israeli investment firm OurCrowd, which has in its portfolio companies considering local listings. "It's simply a much-needed, long-overdue correction of a fundamental imbalance which was that in Israel, this dynamic tech economy with all kinds of tech companies going public, they were not doing it locally." Demand for services facilitating life online, including work, school, shopping, socialising and leisure activities, has boomed during the pandemic, as curbs to halt the virus largely confined the global population indoors. Israeli startups have been lifted by this trend, furling hopes that more will opt to list at home, at least initially.
"The Israeli market all of a sudden appreciates technology, so now you can get valuations at the right point where it makes sense to go public in Tel Aviv, and then switch to New York and be dual-listed when the company grows a little bit more," said Lior Aviram, head of the high-tech and venture capital practice at law firm Shibolet. "That's a game changer."