Photographer: Rina Castelnuovo/Bloomberg

Israeli IPOs Reach a Three-Year High

  • Private equity companies had largest local IPOs this year
  • Israel’s benchmark stock index one of world’s worst perfomers

Israeli private equity firms are leading a comeback in local share sales that could revive the Tel Aviv Stock Exchange that’s been shunned for overseas listings.

Aeronautics Ltd., a drone maker backed by Viola Private Equity, raised 460 million shekels ($130 million) from an initial public offering on the TASE, as the bourse is known. The sale is the eighth local listing this year and the country’s largest since 2011, according to data compiled by the exchange. Companies bankrolled by private equity funds had the three largest IPOs.

Private equity firms are selling shares to exit investments that are too small or locally focused to draw interest from foreign buyers and exchanges. The listings are a boost for the exchange, which lost a quarter of its companies since an MSCI Inc. upgrade to developed-market status in 2010. The TASE has missed out on listings from technology companies, which have favored U.S. markets, and its benchmark equity index is one of the world’s worst performers this year.

After three or four local listings, “there starts to be a buzz,” said Avraham Well, head of law firm FBC & Co.’s corporate practice. “Private equity firms realized that the local bourse was their only real chance of an exit.”

FBC is working with several other private companies such as IC Power Ltd., Universal Motors Israel Ltd. and Holmes Place Spa Ltd., which are planning to list in Tel Aviv, Well said, without giving further details.

The eight companies that listed locally this year have raised almost $370 million, the most since 2014, according to TASE data. It’s also the biggest number of companies to list on the exchange since 2011, the data show.

Still, the exchange is failing to attract listings from Israel’s biggest technology startups. Companies such as Wix.com Ltd. and Mobileye NV chose to list in New York, while other startups sold their businesses to larger competitors such as Microsoft Corp. and Amazon.com Inc.

Worst Performers

The TA-35 Index has slipped 2.4 percent this year, making it one of the 10 worst performers globally when measured in local currency, according to data compiled by Bloomberg. The seven companies that listed this year have declined by an average of 2.1 percent. Daily trading volumes slumped 40 percent after the MSCI upgrade, to $330 million in 2016.

That’s not deterring private equity firms from their sale plans. Apax Partners LLP has started preparing an IPO for Psagot Investment House Ltd., Israel’s largest investment house, in a deal valuing the company at about 3.7 billion shekels, a person familiar with the matter said in April. Fimi Opportunity Funds, Israel’s largest private equity firm, listed a healthcare logistics business on the TASE in January. Fortissimo Capital’s Telrad Networks raised 200 million shekels when it sold shares last month.

“There’s a real change in the trend,” TASE Chief Executive Officer Itai Ben-Zeev said at a conference in Tel Aviv last week. “The potential of the Israeli stock exchange is very high.”

Private equity firms aren’t the only companies weighing local IPOs. Israel’s biggest banks are considering listing their credit card businesses in Tel Aviv after banking reforms forced them to sell the units. Israel Aerospace Industries Ltd. plans to raise as much as $800 million in an IPO this year, Ori Yogev, head of the government authority that oversees the state-owned weapons manufacturer, said in September.

Despite its failure to attract technology firms, the Tel Aviv bourse is starting to change, according to Gideon Tadmor, chairman of Navitas Petroleum Ltd., an Israel-based oil explorer.

“Ten years ago, they knew nothing,” Tadmor said of local energy investors. “Today, they know a whole lot.”

Navitas aims to raise $15 million in an IPO next month, while Tadmor’s former company, Delek Group Ltd., also is planning share sales in Tel Aviv.

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