Israeli tech companies have recently joined the wave of initial public offerings on the Tel Aviv Stock Exchange. This is not the first time tech companies have gone public on the TASE and it will take some time to see if this is a real trend or a temporary phenomenon motivated by the tide of capital markets activity in the coronavirus era. Still, the growing number of high-tech companies wishing to go public, together with the ongoing overhaul of the Tel Aviv Stock Exchange, may indicate that local offerings will become a sustainable addition to Israeli high-techs known exit optionsM&A or IPO on the US markets.
Either way, an IPO of an Israeli high-tech company on the TASE is no less than a meeting of cultures. It requires some level of adaptation, both on the part of the capital market, which takes on a company with unique characteristics, and on the part of the companies, which must adjust to the status of a public company.
The Israeli capital market is accustomed to closely held companies controlled by an individual, family, or holding company. Such controlling shareholders sell a minority stake to the public and leave control in their own hands, along with the freedom to steer the company as they wish. The corporate regime governing Israeli public companies has developed around protection of the public against the controlling partys power. Such protections are irrelevant to most high-tech companies, whose holding structure is decentralized, after rounds of capital raising and share allocations to employees.
Thus, for example, tech companies with dispersed shareholding need to provide solutions for a different concern. The fear there is that shortly after the IPO, the companys entrepreneurs and primary shareholders may sell their holdings and leave the public with an empty shell. This concern has led underwriters to make new IPOs contingent upon stricter lock-up periods (which bar post-IPO sales by existing shareholders), beyond the existing Israeli regulatory requirements.
For high-tech companies, the road to the TASE requires many more changes. In these companies, the custom, developed over decades, has been to adapt their corporate structure to that common in the international technology investments market. As early as day one, companies adopt English language corporate documents in anticipation of welcoming foreign investors. Later, they prepare for the possibility of merger and acquisition transactions, be it to an investment entity or a strategic buyer.
Companies and investors also prepare for the possibility of an exit by means of an IPO in the United States. Preparation for the possibility of a public offering on the Tel Aviv Stock Exchange, with its unique characteristics, never even used to be considered.
Tech companies arriving at the IPO phase need to make three significant changescapital structure, corporate regime, and transparency.
Companies usually attempt an IPO after a series of capital raisings that create different classes of shares. The classes of shares form a hierarchy of rights, with recent investors at the top and entrepreneurs and employees at the bottom. A TASE IPO involves forgoing excess rights attached to different classes of shares and flattening the companys capital structure to a single class of share.
The more differences exist between the shares rights, the greater the conflicts of interest and the potential for disputes among the shareholders, when they consider initiating the IPO and consolidating the companys capital structure.
Another challenge presented by the capital structure of tech companies going public is the number of existing shareholders. Tech companies may have aggregated dozens of shareholdersentrepreneurs and investors, as well as employees and consultants who hold options and shares. That number may be even greater, for instance in companies who raised capital through crowdfunding. Managing the IPO process with a large number of shareholders, interested parties, and parties with various degrees of involvement may be particularly difficult and may even jeopardize the IPOs success.
The corporate regime of a high-tech company is enshrined in its articles of association, and is built gradually over the capital raising rounds undertaken by the company. This regime includes allocation of representation in the companys board of directors between the entrepreneurs and the investors. It also grants special rights to investor groups whose consent is required on important matters and secures their rights in the course of future capital raisings.
The offering and registration process on the TASE involves elimination of the previous corporate regime and replacing it with a regime of public companies. There will no longer be a board of directors comprised of holders of rights granted through past capital raising rounds. Instead, there will be a board of directors elected annually with external directors appointed by a special majority for a three year term. This also nullifies special decision-making rights, with decisions now to be made by a regular majority or a supermajority, where the law requires such.
Finally, companies also need to become transparent. Tech companies are clandestine creatures by nature. They take care to keep their affairs secret. From the companys value during capital raisings to strategic agreements and business results, few are privy to such information. Only board of director members and large investors are entitled to information. No one else, including shareholders and employees, is exposed to it.
An IPO, however, exposes a company. The primary theme of an IPO prospectus is full disclosure, centered on bringing all relevant information to the public. As a result, employers, customers, suppliers, and competitors may benefit from the disclosure of company secrets.
Here, too, it is possible not all interested parties will be equally welcoming of exposure. Since the rules of disclosure are strict, the choice may be between avoiding the IPO and a conflict with some of the companys shareholders, investors, customers, or strategic partners.
While we wait to see if the Start-Up Nation establishes roots in the Tel Aviv Stock Exchange, it is important to understand that these tech companies entry into the Israeli capital market requires adjustments from both parties, the local market itself and the companies and their shareholders.
For shareholders, the challenge is uncertainty. For them, a public offering is not in and of itself an exit event, but only a hope for the future. As a first step, in order to make the IPO possible, they should make a series of adjustments that involve forgoing their rights. They do so with the hope that when the lock-up period ends they will be able to trade their shares, if at that time the companys performance and marketability will be favorable. The assumption is that the advantages of the offeringmaking the company accessible to public capital raisings and creating the possibility for shareholders to realize their investmentsoutweigh the disadvantages associated with uncertainty.
Follow this link:
- Rackspace Technology Named a Top 15 Sourcing Standout by ISG - GlobeNewswire - May 11th, 2021
- Enhancing the impact of Technology Modernization Fund - FCW.com - May 11th, 2021
- Converge Technology Solutions Corp. Wins Five IBM Awards Including Top North America National Sell Business Partner of the Year - PRNewswire - May 11th, 2021
- DLS Technology Corporation Recipient of the 2020 Citrix Innovation Award for Partners - GlobeNewswire - May 11th, 2021
- Hempacco and Open Book Extracts to Debut Hemp Cigarette Flavoring Technology at Industry's Largest Annual Trade Show - Yahoo Finance - May 11th, 2021
- Experts to Discuss the Future of the Technology Supply Chain - inForney.com - May 11th, 2021
- Funny faces in face recognition could increase phone security with new technology - NBC2 News - May 11th, 2021
- Technically speaking: How technology helped save independent Dallas restaurants during the pandemic - The Dallas Morning News - May 11th, 2021
- Why International Game Technology Stock Popped Today - Motley Fool - May 11th, 2021
- Lack of Time for Analysis, Adoption of New Technology and Data Limitations are Top Challenges Facing Finance Teams, According to insightsoftware... - May 11th, 2021
- High Technology Is Best STEM School In Nation - Patch.com - May 11th, 2021
- Multiple Texas State, Local Governments and Education Institutions Modernize with GTY Technology Solutions for Digital Transformation - Business Wire - May 11th, 2021
- 2022 Volkswagen Tiguan freshens up with new styling, technology, and touch controls - The Car Connection - May 11th, 2021
- Why Technology Could Be The Answer For The Global Obesity Epidemic - Yahoo Finance - May 11th, 2021
- Marchex to Participate in the 16th Annual Virtual Needham Virtual Technology & Media Conference - Business Wire - May 11th, 2021
- Merkle Technologies Set to Launch Revolutionary Blockchain Technology that will Enhance Ledger Communication - PRNewswire - May 11th, 2021
- Fungicide Approved with Three-Way Biological, Chemical and Nano Technologies - Agweb Powered by Farm Journal - May 11th, 2021
- Worldwide Mobile Robotics Industry to 2029 - Featuring Northrop Grumman, Adept Technology and John Deere Among Others - ResearchAndMarkets.com -... - May 11th, 2021
- Global Sports Technology Market (2021 to 2026) - Featuring IBM, Cisco and Ericsson Among Others - ResearchAndMarkets.com - Business Wire - May 11th, 2021
- 10 Hot Data Center Technologies And Trends To Watch In 2021 - CRN - May 11th, 2021
- Outlook on the Oleoresins Global Market to 2025 - by Manufacturers, Regions, Technology, Application and Product Type - ResearchAndMarkets.com -... - May 11th, 2021
- FICS Hosts 34th Annual Users' Conference, Promotes Education in Technology for Continued Success - Business Wire - May 11th, 2021
- Loop inks LOI to become official technology partner to $2.7B All Net Resort and Arena Project in Las Vegas - Proactive Investors USA - May 11th, 2021
- Shift Technology raises $220M at a $1B+ valuation to fight insurance fraud with AI - TechCrunch - May 11th, 2021
- Hearing aids for the masses: How changing technology and government policy can help - The Denver Post - April 25th, 2021
- Safety belts, the postal 'service' and using technology - Antelope Valley Press - April 25th, 2021
- FHSU Hosting Technology Education Fair - KSAL - April 25th, 2021
- New Oriental Education & Technology Group (NYSE:EDU) May Have Issues Allocating Its Capital - Yahoo Finance - April 25th, 2021
- Cloud software marketplaces are linchpin to driving innovative technology solutions into DoD - C4ISRNet - April 25th, 2021
- Technology allowed Extension to keep doing its job - Traverse City Record Eagle - April 25th, 2021
- Abbott Vascular: delivering vascular care in 2021 | Technology & AI - Healthcare Global - Healthcare News, Magazine and Website - April 25th, 2021
- The Future of Retail: BOPIS 2.0 and RFID Technology | RFID JOURNAL - RFID Journal - April 25th, 2021
- How can technology bridge fintech and SMEs to ease the lending process - YourStory - April 25th, 2021
- The good, the bad and the truly horrifying potential of CRISPR technology | TheHill - The Hill - April 25th, 2021
- How Technology Is Revolutionizing Wildlife Photography - Fstoppers - April 25th, 2021
- This has just become a big week for AI regulation - MIT Technology Review - April 25th, 2021
- SEC Commissioner on Banning Bitcoin: 'It's Very Difficult to Ban Peer-to-Peer Technology' Regulation Bitcoin News - Bitcoin News - April 25th, 2021
- Russia will rework technology developed for the ISS for its space station - SlashGear - April 25th, 2021
- Paritosh Jauhari Joins Successive Technologies as Chief Technology Officer - PR Newswire India - April 23rd, 2021
- Amazon's cashierless checkout technology is coming to its new supermarkets - CNBC - April 23rd, 2021
- Blockchain Technology Market Value Reach US$ 3.7 Billion By 2020 Covering Pre And Post COVID-19 Market Analysis: Acumen Research And Consulting -... - April 23rd, 2021
- Verrency Ranked Number 1 Fastest Growing Technology Company in Australia on the Deloitte Technology Fast 500 Asia Pacific 2020 Ranking - PRNewswire - April 23rd, 2021
- Wearable technology market was valued at USD 116.2 billion in 2021 and is anticipated to reach USD 265.4 billion by 2026, growing at a CAGR of 18.0%... - April 23rd, 2021
- Sharing Economy International Invests to develop NFT Technology into ECrent to Open Up Digital Items Sharing - PRNewswire - April 23rd, 2021
- Inclusive Making course focuses on disabled users in technology spaces - Daily Northwestern - April 23rd, 2021
- How smart technology can drive the decarbonisation of transport - AirQualityNews - April 23rd, 2021
- Abel Noser Solutions Expands Their Technology Group with New Hires - GlobeNewswire - April 23rd, 2021
- EyeWay Vision Joins Technology Innovation Collective The LaSAR Alliance | ARPost - ARPost - April 23rd, 2021
- Visionox Technology, Inc. and Universal Display Corporation Extend Long-Term OLED Agreements - Business Wire - April 23rd, 2021
- SBA Announces First-of-Its-Kind Technology Initiative for Restaurant Revitalization Fund - Drgnews - April 23rd, 2021
- Dow and Mura Technology announce partnership to scale game-changing new advanced recycling solution for plastics - Yahoo Finance - April 23rd, 2021
- II-VI Incorporated Inaugurates Technology and R&D Center in Shanghai - GlobeNewswire - April 23rd, 2021
- Skycatch Announces New Technology Initiatives to Achieve Climate-Resilient Infrastructure Globally - PRNewswire - April 23rd, 2021
- JetBlue Technology Ventures Invests in Universal Hydrogen to Support the Airline's Ambitious Sustainability Strategy - Business Wire - April 23rd, 2021
- Apria Healthcare Collaborates with Rackspace Technology to Leave the Data Center Resulting in Improved Customer Experience and Increased Savings -... - April 23rd, 2021
- Interactive College of Technology and DeVry University Partner to Create Unique Academic Pathway to Offer Students Easy Transfer - Business Wire - April 23rd, 2021
- Airbiquity and NXP Expand Technology Collaboration to Address Automaker Challenges with Managing Software and Data for Intelligent Connected Vehicles... - April 23rd, 2021
- DNA technology leads to arrest of man accused of sexually assaulting girl at East Texas camp - Tyler Morning Telegraph - April 23rd, 2021
- Lumeda Selected as one of the 25 Technology Companies to Watch in the Greater Hartford Area - WFMZ Allentown - April 23rd, 2021
- Accelerating Turnover to New Technology Diesel Engines, Increased use of Biobased Diesel Fuels Ensures Steady Progress on Carbon Reduction, Clean Air... - April 23rd, 2021
- Professional Sports Authenticator Acquires Genamint to Introduce Next-Generation Technology to Grading Process - PRNewswire - April 23rd, 2021
- When Seconds Count: The Technology That Saved Lives In Oologah's Powerful 1991 Tornado - News On 6 - April 23rd, 2021
- Digital Health Technologies Market is Projected to Reach USD 68.17 billion and Rise at CAGR of 4.80% by 2028 - GENERAL ELECTRIC COMPANY, Abbott, Bosch... - April 23rd, 2021
- How to Use Technology to Prepare for Travel During the Coronavirus Pandemic - The New York Times - April 15th, 2021
- Frasil: Deciphering Technology to Reduce Isolation and Improve Communication of PLWDs - Analytics Insight - April 15th, 2021
- The Blacks in Technology Foundation Partners with Apprenti to Increase Black Representation Across the Tech Industry - PRNewswire - April 15th, 2021
- Nokia technology chief: The future is in software - FierceWireless - April 15th, 2021
- DUG Technology, Curtin University Enter Into Supercomputing Partnership - HPCwire - April 15th, 2021
- Outlook on the Wireless Charging Global Market to 2026 - by Technology, Transmission Range, Application and Region - ResearchAndMarkets.com - Business... - April 15th, 2021
- Beth.Technology Announces Major Rebrand to I/O Fund - Business Wire - April 15th, 2021
- Ivy Tech receives $17k in sheet metal donation for Automotive Technology Program - WANE - April 15th, 2021
- Fed OIGs Leveraging Technology to Adjust to Pandemic Landscape - MeriTalk - April 15th, 2021
- Pre- and Post-COVID, Technology Is Reshaping Admissions Forever | Call to Action: Marketing and Communications in Higher Education - Inside Higher Ed - April 15th, 2021
- We Dont Need Tech Infomercials - The New York Times - April 15th, 2021
- This information technology stock has zoomed 134% in 6 weeks - Business Standard - April 15th, 2021
- 2021 Leadership Quadrant of Millimeter Wave Technology Suppliers - 8 Companies Included Such as Ridgewave, E-Band and Lightpointe -... - April 15th, 2021
- Coronavirus vaccine technology is paving the way for a whole new approach to flu shots - The Spokesman-Review - April 15th, 2021
- Japan's ticket to zero carbon could be century-old technology - The Japan Times - April 15th, 2021
- ABERDEEN INTERNATIONAL (TSX:AAB, FR:A8H, OTC:AABVF) Technology Partner T2M Global Selected by the US Department Of Energy to Use AES-100 Technology to... - April 15th, 2021
- Advanced Manufacturing Technology (AMT) TechVision Opportunity, Annual Subscription - Latest Global Innovations and Developments - Yahoo Finance UK - April 15th, 2021