Go Forth To The U.S. And Prosper

Israeli high-tech startups find a warm reception on NASDAQ

America's tech-stock fever has reached Israeli shores. But the hottest action isn't in Tel Aviv. It's on America's NASDAQ stock market.

With local entrepreneurs long counting on Wall Street investors to snap up the best of Israel's high-technology equity offerings, investment banks are now lining up as many as 30 new issues to go public on NASDAQ in 1996, predicts Shlomo Kalish, managing director of Jerusalem Global Consultants. All told, Israelis may unload a record $700 million to $800 million in new shares and secondary offerings this year, up from $450 million in 1995.

Enthusiasm is so high that shares in one hot company that went public in February--ESC Medical Systems Ltd., a maker of devices to zap varicose veins with pulses of light--nearly doubled in value in their first few days of trading on NASDAQ. The company, whose 1995 sales and earnings were $8.4 million and $2.8 million, respectively, now trades at $25, with a price-earnings ratio of 55.

WHY NOT? In listing its stock in the U.S., ESC joined 65 other Israeli high-tech companies already trading on Wall Street, including equipment maker ECI Telecommunications, whose shares climbed 88% last year, and Teva Pharmaceutical Industries, up 77%. Now, investors are salivating over what's likely to come next.

And why not? Israel's booming economy, the peace process, and the Arab boycott's end are buoying hopes. Among NASDAQ initial public offerings expected soon: CheckPoint, a leader in network- security software, and Orbot Instruments, a maker of semiconductor inspection devices. Tadiran Telecommunications, a maker of telecom and networking equipment, also is expected to sell stock. Adding to the IPO frenzy is the arrival of a clutch of tech-oriented American investment banks including Robertson Stephens, Cowen & Co., and Montgomery Securities. "The entry of the highly specialized technology boutiques is a further upgrading of Israel on the international investment map," says Ron Lubash, a managing director at Lehman Brothers Inc. in Tel Aviv.

The new firms' arrival in the Israeli market is producing cutthroat competition for deals and fears that bankers are lowering their standards, says Zeev Holtzman, managing director of Giza Ltd., a Tel Aviv consulting firm. Holtzman fears that some companies not yet ready for the market are going public. His concerns recall a similar epidemic of tech-stock mania that swept Israel in the early 1990s. That one resulted in the failure of a number of offerings. But many traders think this public offering movement is on firmer footing. As long as Israel continues producing more than its share of high-tech winners, the investment bankers will be on the prowl for the next generation of success stories.

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