An employee walks past a screen displaying market data at the Tel Aviv Stock Exchange.
(photo credit: REUTERS)
Israel Securities Authority chief Shmuel Hauser on Tuesday said that a recent trend of startups and companies choosing to stay private was detrimental to financial markets and the economy as a whole.
“We cannot accept this situation because it means damage to employment and growth,” Hauser said at a Globes conference on capital markets in Tel Aviv.
“In the past, public exposure was an advantage for liquidity the stock exchange offered and the ability to raise cheap capital, as well as the prestige earned by being on the exchange.
Today, despite these advantages, the exposure is considered a disadvantage and is leading to a situation that even companies whose securities are listed are considering delisting from the exchange and becoming private, far from the market,” he explained.
The Tel Aviv Stock Exchange has been struggling to reinvigorate itself in recent years, entering partnerships with foreign exchanges and listing a new variety of products to diversify its utility to companies and investors. It also made regulatory alignment a priority, to incentivize local companies to dual list, even if their primary trade platform is abroad.
But the problems the TASE face are compounded by the facts Hauser cited; some companies simply don’t have a financial incentive to open themselves up to intense public scrutiny in order to raise cheap capital. The trend is not exclusive to Israel.
In the US, for example, the number of private billion-dollar companies grew from 13 in 2012 to 40 in 2014, according to Bloomberg, indicating that the companies saw no value in going public.
Elah Alkalay, VP Business Development at IBI investments, echoed Hauser’s sentiment.
“There are not enough large companies on the stock exchange,” she said, arguing that the government should provide tax incentives for companies going public. Another concern, she said, was that only four of the exchange’s members are non-bank entities, down from 11, meaning that most of the trading was being run by an increasingly small, uncompetitive sector.