Tel Aviv Exchange Files for IPO, to Be Led by U.S. Firm Jefferies

Bourse sees offering as step toward upgrading Israel’s flagging capital market

File photo: The Tel Aviv Stock Exchange.
Ofer Vaknin

The Tel Aviv Stock Exchange filed a draft prospectus on Thursday for an initial public offering of its shares and said the U.S. financial services firm Jefferies would be leading the sale. It also reported that its revenues and earnings fell in the first quarter.

The IPO, whose timing now depends on approval by the Israel Securities Authority, will mark a major step forward for the bourse as it seeks to become more dynamic and competitive and to boost flagging trading volumes and listings.

The TASE demutualized itself in 2017 to become a for-profit corporation and last year sold nearly 20% to investment fund Manikay Partners and another 19% to four other foreign investors.

“The share offering is another step by which we are moving to develop the capital market and enable it to become more innovative and advanced as the most advanced markets in the world,” said Anat Guetta, chairwomen of the ISA, which has been leading efforts to overhaul the TASE.

“Offering shares in the stock exchange is a recognized part of the process in markets that have undergone the same structural change, from control by its members to control by shareholders,” she said.

The Manikay sale valued the TASE at 551 million shekels ($153 million). On Thursday market sources said the TASE would be valued at 650 million shekels for the IPO, but they stressed that was a preliminary figure and expected it would increase before the shares are sold.

No other details about the IPO were available, but in April the bourse said it planned to sell a 30% stake after it published first-quarter results.

The choice of Jefferies is a seemingly unusual one. The firm only become a TASE member fours day before the IPO announcement and then only as a remote member, which does not have a permanent representative or branch in Israel.

That is in contrast with other foreign banks such as Citi, UBS, HSBC and Barclays, which are regular members of the TASE and have a presence in Israel.

Sources explained that as a medium-sized firm by American standards Jefferies was the right size for what will be a relatively small IPO. It is also better positioned than any Israeli underwriter to market TASE shares to overseas investors. In any event, it will enlist Israeli underwriters to help with the offering.

Meanwhile, the TASE has to contend with a simmering dispute with its workers commit that led to a wildcat strike May 21 and delayed the market’s opening by five hours. Source said that while the disputes have not been resolved, the atmosphere is calm enough now to let the IPO move forward.

In parallel with the IPO announcement, the TASE said it earned 5.4 million shekels in the first quarter, down from 8.1 million a year earlier. Revenue slipped 2% to 64.6 million while earnings before interest, taxes, depreciation and amortization declined to 7.3 million from 12 million.

The bourse attributed the drop in revenue to lower trading volume and clearance fees. At the same time expenses rose 12% to 61.7 million shekels in the quarter, in part due to an advertising campaign starring comedian Adi Ashkenazi launched in February to coax the public into investing in securities.