Bloomberg News

Nasdaq Loses ‘Holy Grail’ Status for Offerings: Israel Overnight

November 07, 2011

Nov. 6 (Bloomberg) -- Companies from Israel, the second- biggest source of foreign listings on the Nasdaq Stock Market behind China, are favoring mergers over selling equity in New York as a cheaper and easier way to generate cash.

Fundtech Ltd., a provider of banking software, agreed to be acquired by GTCR Golder Rauner LLC last month, and Ness Technologies Inc. delisted from the Nasdaq after the information technology company was bought by Citi Venture Capital International. No Israeli company held an initial public offering on the Nasdaq this year, after two in 2010. Today there are 60 Israeli companies listed on the exchange.

“Nasdaq used to be the holy grail for the Israeli entrepreneur, but now it’s over,” said Richard Gilden, a partner at Kramer Levin Naftalis & Frankel LLP, whose firm represents companies including Fundtech and Ceragon Networks Ltd. “The private equity world has an interest in Israel. It’s faster, more predictable, and puts cash in your pocket.”

The Bloomberg Israel-US 25 Index of the largest Israeli companies listed in New York fell 3 percent to 88.41 last week, the biggest drop since the week ended Sept. 23, on concern that Europe’s debt crisis is worsening and will curb growth. EZchip Semiconductor Ltd., an Israeli maker of network processors, led declines last week, retreating 16 percent. Shares of the company rose 1.1 percent to 114.90 shekels at the 4:30 p.m. close in Tel Aviv today.

While Israeli companies flocked to the Nasdaq in the past, the Sarbanes-Oxley Act of 2002 that raised the legal and auditing fees for public companies, as well as a global equity rout that erased about $6 trillion from markets over the past five months, is pushing firms to sell themselves instead of pursuing independent listings, Gilden said in an interview from New York.

‘Culturally Attuned’

“In the stock market, you have some risks you have no control of,” said Gilden, who specializes in corporate finance and mergers. “It’s difficult for the Israeli entrepreneur to be culturally attuned to a company that is highly regulated in a foreign country.”

GTCR, a Chicago-based private-equity firm, will pay $23.33 in cash for Fundtech shares, 33 percent higher than the $17.56 closing price on Sept. 14, the day before it made its offer. GTCR will combine the company with BankServ, which operates in the same sector.

Citi Venture Capital International, a private equity investor and investment adviser focused on developing markets, paid $307 million in cash for Tel Aviv-based Ness, a 16 percent premium to the closing price in New York on June 10 before the deal was announced.

Voltaire, Mellanox

Shares of Voltaire Ltd. were also delisted this year, after the company was acquired by Mellanox Technologies Ltd., the Israeli adapter maker that’s partly owned by Oracle Corp.

CSR Plc, the U.K. maker of chips used in Nokia Oyj mobile phones, completed the acquisition of the Israeli developer Zoran Corp. in August, taking it off the Nasdaq.

While shares of SodaStream International Ltd., the Israeli producer of homemade soda machines, have gained 75 percent since its initial public offering in November last year, their value fell by 49 percent during the past three months.

Bioline RX Ltd., the biopharmaceutical company whose largest shareholder is Teva Pharmaceutical Industries Ltd., listed its American depositary receipts on Nasdaq on July 25, without raising capital, in order to boost its profile among U.S. investors. Shares have dropped 33 percent since.

Israeli companies are waiting for better market conditions for more offerings and they’re still interested in listing on the Nasdaq, said Andrew Uerkwitz, an Israeli-technology analyst at Oppenheimer & Co. in New York.

Groupon IPO

“They see the premium that investors are paying for the social media site companies and they want to take advantage of that,” he said. “The interest is still there because valuations are so promising.”

Jennifer Knapp, a spokeswoman for the Nasdaq in New York, said she would seek an official to comment on the status of Israeli IPOs.

Groupon Inc., which offers online coupons, surged 31 percent in its trading debut last week after pricing the offering at $20 a share. The company raised $700 million, compared with the $540 million they filed to raise Oct. 21, the biggest IPO by a U.S. Internet company since Google Inc. first sold shares in 2004.

LinkedIn Corp., the biggest professional-networking website, has surged 83 percent from its initial share offering on May 18.

Israel’s Histadrut labor federation will call a general strike this week, as talks with the government over contract workers have so far failed to result in an agreement.

Workers’ Strike

The strike, scheduled to begin at 6 a.m. tomorrow, will include “large portions of the public sector,” such as airport, seaports and government workers, as well as some private workplaces, the organization said in an e-mailed statement last week.

The Tel Aviv benchmark TA-25 Index retreated 5.3 percent last week, the biggest drop in almost two months. The index gained 0.5 percent to 1,112.02 today.

The shekel weakened 2.3 percent last week to 3.6747 per dollar by 5 p.m. in New York on Nov. 4. It was the biggest weekly slide since the period ended Sept. 9.

Israeli technology companies raised $522 million in capital during the third quarter of 2011, $47 million less than in the second quarter, according to the Israel Venture Capital-KPMG Quarterly Survey released Oct. 24.

EZchip retreated to $31.31 last week. The Tel Aviv shares dropped 15 percent to 113.70 shekels, or the equivalent of $30.94.

The company reduced its revenue outlook last week, warning demand for the rest of the year may weaken.

Mellanox gained 7.2 percent to $35.18 last week, the best performer on the benchmark. The shares in Tel Aviv climbed 2.8 percent to 120.10 shekels, or the equivalent of $32.68 during the same period. The $2.50 premium was the largest among the biggest Israeli companies listed in New York. The shares of the adapter maker that is part-owned by Oracle Corp. soared 9.1 percent to 131 or $35.65 shekels in Tel Aviv today.

--With assistance from Shoshanna Solomon in Tel Aviv. Editors: Brendan Walsh, Glenn Kalinoski, Susan Lerner.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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