IPO in Israel
THE ONLY STOCK EXCHANGE IN ISRAEL
The Tel-Aviv Stock Exchange (TASE), which was established in 1953, is the only trading place for securities issued by public companies and government bonds. More than 600 companies are listed, and 10% of those stocks are dual listed on other stock exchanges in other countries, especially the U.S. Derivatives products such as options, exchange-traded funds, Exchange-traded notes, mutual funds, corporate bonds and government bonds are also available on TASE. The market opens from Monday to Thursday from 9:59am to 5:14pm and Sunday from 9:59am to 3:39pm, but it closes on every Friday and Saturday.
The market capitalisation of TASE was over NIS 958 billion (USD 293 billion) and the equity turnover was NIS 3.5 billion (USD1 billion) as of 1 July 2021. The stock market activities are rising continuously, and the daily trading volume in shares has increased 43% in the year 2020.
NIS 4.6 billion (USD 1.4 billion) was raised in 27 IPO’s and the Capital raising on the equities market amounted to NIS 17 billion (USD 5.2 billion) in 2020, compared to NIS 13.3 billion (USD 4.1 billion) in 2019. The IPO momentum carried over to 2021. As of 17 June, 63 companies, including 44 tech firms, are newly joined the TASE, raising a total of NIS 7.8 billion (USD 2.3 billion). 33 of those IPOs launched in the Q1 2021 was the highest quarterly IPO fundraising since 1993 that was recorded 186 IPOs, according to data from the TASE.
Ittai Ben Zeev, The CEO of TASE, said: “2020 has been a significant year for TASE, with growth across all parameters — the number of new Israeli companies that listed on TASE, primarily from the technology sector, the variety of new services and products launched by TASE, the public’s interest in TASE and the increased trading volumes, as reflected in the exceptional results and in the bottom line. ….”
Israel is one of the most innovative countries in the world, and Bloomberg ranked it the fifth in the Bloomberg Innovation Index in 2019. As Israel’s tech ecosystem booms, the country has been evolving as a Start-up Nation with many fast-moving small tech firms. Those small entrepreneurs well manage their own companies, sell their products quickly and scale them up to larger sizes.
The TA-Tech Elite index, which includes most of the listed tech and biomedical firms, stood at NIS 236 billion (USD 72 billion) market capitalisation as of 1 Jul 2021. It has soared 50% in dollar terms from 1 January 2020 to 1 Jul 2021, compared to a 69% jump in the Nasdaq. Average only 5.6% rose among firms on the TA-35 Index over the same period, according to the data from TSAE (https://www.tase.co.il/en/market_data/index/142/graph).
ISRAELI COMPANIES LISTED OVERSEA
More than 150 Israeli companies have raised capital through overseas equity markets. These companies are mainly high-tech or software companies. Many are traded in the US NASDAQ, the American Stock Exchange and the New York Stock Exchange. About 30 Israeli companies listed on the London Stock Exchange and on the Nouveau Marche.
TASE has been encouraging those oversea listing Israeli companies to dual listing in Israel for years. Since 2016 some 100 listing regulation rules had been deleted, companies looking to list on the TASE can publish their prospectus or financial reports in English and no need to produce a new shelf prospectus every year. As the listing process is relatively simpler and quicker in Israel than in the U.S., TASE is now more suitable and attractive for Israeli tech firms to go public. Most importantly, there are very strong institutional investors, who have capital and knowledge, in Israel are interested in Israeli high-tech. Nowadays, TASE has gained popularity from global tech investment funds and sophisticated investors.
Those dual listing companies benefit from not only diversifying the source of capital raising but also extending the trading days and hours. Furthermore, the high liquidity and tradability of dual listed shares are attractive to investors. Dual listed companies, as international companies, enjoy a broader analytical coverage in multiple markets globally.
The market cap of the dual listed shares is close to NIS 280 billion (USD 85.6 billion) with a free float rate of more than 80%. However, the trading on TASE represents 32% of the total trading on TASE and overseas. New Index “TA-Dual Listing index” is the appeal of trading in the dual listed shares.
In Israel, trading in securities and raising capital from the public are regulated by the Securities Act. The Securities Authority authorises the issuance of prospectuses, checks financial reports, investigates special transactions and supervises the TASE, in order to protect the investors’ interest.
Listing a stock on the TASE, the company must meet certain criteria and issue a prospectus according to specific requirements. The listing process is subject to the approval of the Securities Authority Board, which is similar to the U.S. stock exchanges. The listing company has to submit Years of business activity report, Stockholder’s equity before & after registration and Public’s equity information.
A public company must have at least seven stockholders, with no maximum limit. The transfer of a public company’s stocks is not restricted. If a public company’s stocks are traded on the TASE, the company is required to publish annual financial statements and quarterly unaudited (but reviewed by a CPA) financial statements which are governed by the Securities Regulations. Public companies are required to make their financial year the same as the tax year. As of 2008, Israel listed companies are required to adopt the Generally Accepted Accounting Principles (GAAP) with the International Financial Reporting Standards IFRS.
The TASE encourages the issuance of shares with equal voting rights and restricts the disparity between the par values of different voting shares. In addition, Israeli companies may distribute their retained-after-tax earnings by way of dividends. The dividends can be distributed from earnings but should not exceed the nominal retained earnings.
Listed public companies must appoint at least two directors who have no business or other relationships with the company, one audit committee and one internal auditor. The company must make an immediate announcement of any major event. Furthermore, any offer to the public must be through a public prospectus.
Written by Ms. Florence Ip. Edited by: Dr. Kyle Wong
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