The coronavirus has left the main Tel Aviv Stock Exchange indices down by as much as a fifth this year, but that hasn’t stopped the initial public offerings market is going gangbusters.
Since the start of the year, 10 companies have listed shares for the first time at a combined value of 12 billion shekels ($3.6 billion). Another 15 companies are planning IPOs with a combined value of between 7 billion and 8 billion shekels.
The clutch of IPOs comes after a long lean period for new offerings on the TASE. In the previous five years, on average just eight companies sold shares annually. Last year, seven companies listed for the first time, down from 11 in 2018 and 17 in 2017 but up from two or three in 2015-2016. The IPO market in those years comprised foreign real estate companies issuing bonds, not stock.
Ittai Ben-Zeev, the TASE’s CEO, said the coronavirus is behind the surge of offerings. Until the crisis, many companies believed that it wasn’t worth going public, especially since it would require them to meet high standards of public disclosure.
“One day you discover that the bank has closed off your credit line and you’re at risk of going bankrupt. Even during a crisis, a strong publicly traded company can raise debt or capital at a discount, so your access to resources is a lot better and you have much more flexibility. More than that, the crisis showed that as a publicly traded company, you’re in no one’s pocket,” said Ben-Zeev.
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Ben-Zeev said other factors in addition to the coronavirus have encouraged the IPO wave. One is the incentives that the government is offering to lure tech companies into the local stock market. In the past, few looked at the TASE as an alternative to a merger and acquisition deal or an IPO overseas. A reform of the IPO process has encouraged more foreign investors, he added. Another contributing factor is low interest rates, which have boosted stock markets around the world by increasing company valuation.
Winners and losers
Although the TA-35 index is down more than 20% this year and the broader TA-125 by almost 15%, the coronavirus has created a wide gap between winners and losers. Sectors that have been hit by the pandemic, such as finance and real estate, have tumbled. The TA-Real Estate and TA-Finance indices are down 30% and 25%, respectively, this year. But sectors regarded as immune from the worst of the pandemic’s effect, such as high-tech and biotechnology, have enjoyed strong gains. The TA-Tech Elite index, for instance, has climbed about 30% so far this year.
Within the tech rubric, the biggest winners of all have been renewable energy and cleantech companies. Shares for these firms have skyrocketed, helped by growing institutional investment. Augwind Energy Tech Storage, which has developed technology to store large amounts of compressed air at high pressure underground, has soared more than 1,000% this year. Brenmiller Energy (thermal energy storage) is up about 650%, Apollo Power (innovative, lightweight, flexible solar panels) has climbed 350% and Electreon Wireless (infrastructure for electric vehicles) had risen 250%.
With share gains like these, it’s no surprise that other companies in renewables and cleantech want a piece of the action. The first of them to do so was Doral Energy, which raised 126 million shekels at a 575 million shekel valuation. It was soon followed by Meshek Energy, which raised 140 million shekels at a 235 million shekel valuation. Since they went public, their shares have risen as much as 60%.
Five more renewable energy company IPOs are on the way. Nofer Energy, a developer of solar power installations, is planning to go public at a 1.5 billion shekel company valuation. Solaer Israel, the Israeli arm of the Spanish company of the same name, is looking to sell shares at a 400 million shekel valuation.
Cleantech companies are joining the party. Ecoppia, which makes robotic solar panel cleaners, is talking to underwriters about going public at a 1.7 billion shekel valuation. GenCell, which has developed clean backup power system for telecom, homeland security, healthcare and other applications, wants to raise capital at an 800 million shekel valuation. Aquarius, a maker of innovative engines, is aiming for an IPO at a one billion shekel valuation.
Another category of company is research and development partnerships that invest in high-tech companies and have been given strong backing by the TASE and the Israel Securities Authority as a way of encouraging high-tech firms in the stock market.
The first of these companies was Millennium, which invests in food tech and has raised 40 minion shekels in two offerings. Unicorn Technologies has issued a prospectus to raise 70 million shekels for general tech investment and Almeda Ventures wants to raises between 100 million and 150 million shekels to invest in life science startups. Others are believed to be weighing IPOs, market sources said.
In biotech, TheMarker has learned that Human Xtensions has begun the IPO process. The startup has developed a bionic surgical glove for use in complex, minimally invasive operations and recently completed a private round of fundraising with Psagot investment house. Sources estimate it will conduct an IPO at a 500 million shekel company valuation led by underwriter Poalim IBI.
The stock market has not been kind to financial service companies, but fintech is another story as more online solutions are being sought for the coronavirus era. Blender, which offers consumer loans online and is in the process of setting up a digital bank in Europe, wants to go public at a 700 million shekel valuation. WeSure, a digital insurer, is exploring either a public or private equity sale, at a 700 million shekel valuation.
Both companies have been encouraged by the Wall Street IPO of the digital insurer Lemonade, a U.S. company founded by Israelis, at a $1.6 billion valuation.
On top of all these tech offerings, a host of old-line companies such a building contractor Danya Cebus, supermarket chain Rami Levy and retailer Max Stock have also completed IPOs this year.