Two weeks before the year 2005 ends, it's fair enough to conclude: This was the year of junk IPOs on the Tel Aviv Stock Exchange.
That may sound extreme, but numbers tell the truth. Investors lost money on over half the initial public offerings on the TASE this year: 18 out of 33 went sour. In eleven cases the loss was in the double digits. Seven of them were biotechnology companies, including incubators for startups developing medical technology and drugs.
Apropos of which, biotechnology issues have been hot stuff since the last quarter of 2005. A new sub-sector was created for them: it's only a matter of time before there's a Biotechnology Index.
Losses | Company |
| TRD Instruments | about -50% |
| BSP Biological Signal Processing | about -50% |
| BioView | about -45% |
| Netex | about -40% |
| ProSeed | about -25% |
| Capital Point | about -24% |
| Klir Chemicals | about -25% |
| B. Yair | about -15% |
| Medigus | about -20% |
| Dorsel B.A.Z. | about -8% |
| Medical Compression Systems | about -15% |
| Biocancell Therapeutics | About -10% |
At the top of the list is TRD Instruments, which makes devices for dental work. Investors in its IPO are out 54%. Next is BSP with about the same performance. BioView, another medical devices company, delivered a loss of 46.4% and shares in search engine company Netex were fourth on the list with a loss of 44% this year.
Also on the list is the ProSeed venture capital fund, which invests in biotechnology and medical device makers.
There is Capital Point, which manages technology incubators, and Klir Chemicals which imports, makes and markets cleaning products, kitchen plastic wrap, and kitchenware; it lost 22%.
Medical Compression Systems is naturally also in medical devices, but B. Yair is a real estate company. BioCancell is biotechnology, Xenia Ventures which runs incubators, the Dorsel real estate firm, Micronet, which is developing computer systems for car fleets, Elran Real Estate, and Nextcom. But losses in the latter were small, so perhaps it doesn't deserve to be included in the junk category.
Altogether investors in these lost about a quarter-billion shekels.
Did investors just leap onto any IPO going? It seems so. If the losses were confined to private brokerages, that would be one thing. But the buyers were provident funds, insurance companies and mutual funds in which the public invested. It is of public interest what they buy.
People at home don't have computer systems tracking the stock market. They aren't out there buying into these IPOs. The ones buying this stuff for them are the provident funds, insurance companies and mutual funds. At each IPO, the institutionals soak up 80% of the stock offered (yes, it's the provident funds, insurance companies and mutual funds), leaving the general public to buy the other 20%. And here too, often the buyers are portfolio managers, not private investors.
Why are seasoned investment managers at the institutionals buying such merchandise? Are they tainted with conflicts of interest and so lacking in Chinese walls that they are guided by the interests of in-house underwriting units?
These institutionals will deny all and explain that at the end of the day, it's all about returns. "No asset manager would put something into his portfolios that would hurt the returns by which he's measured," they'll chant.
Sounds persuasive, the question is whether it's true, certainly when the manager at stake has billions under management and is tossing just a few tens of millions of shekels at some highly risky merchandise.
