Israel may have a sterling reputation for producing hi-tech start-ups, but when
faecd with the decision to go public or sell out, 95 percent sell to foreign
bodies, according to an interim report submitted to the Israel Securities
Authority (ISA) on Tuesday.
In 2012, Israeli hi-tech companies raised
only 27% of their funds from local venture capital funds, while the rest came
from abroad or other sources.
The report was compiled by the Committee to
Promote Investment in Public Companies Engaged in R&D, and outlines
preliminary recommendations the government could take to help companies fund
themselves locally instead of looking abroad for capital.
“Due to the
dependency of young hitech companies on foreign funds, and the fact that over
95% of these companies are acquired by foreign corporations, the committee
recommends implementing a number of moves which will contribute, in the
aggregate, to producing an efficient and worthwhile option for raising funds,”
the report stated.
The committee recommends that the Tel Aviv Stock
Exchange create a special “elite tech” listing for hi-tech companies, that will
grant exemptions and reduce reporting requirements to make listing easier. It
also suggests the state offer tax breaks to investors who buy shares of research
and development companies during their initial public offerings.
report recommends encouraging the creation of more local venture capital funds
and the provision of special regulations and tax incentives to focus them on
Israeli hi-tech. The proposed regulation would not tax the company’s assets
until they were sold, provided that the company invested 70% of publicly raised
funds in locally traded hitech.
It also recommends other solutions, such
as opening up online crowd-funding to help young companies find
ISA chairman Shmuel Hauser said keeping technology companies
in Israel is important due to their significant contribution to economic growth
and job creation.
“The need to undertake measures to help Israeli R&D
companies raise capital is unquestionable,” he said, “whether this be through
public offerings on TASE, through TASE-traded venture capital funds and R&D
partnerships that invest in hi-tech companies, or through off-exchange financial
mechanisms.” Hauser also expressed his regret that Mellanox – one of the largest
companies traded on the TASE – had announced plans to delist from the Israeli
exchange and maintain trading solely on NASDAQ, where it was
“While our listing on the TASE has provided a venue for
certain Mellanox investors to trade, we believe it’s in the company’s best
interest to concentrate our trading on NASDAQ,” CEO Eyal Waldman said at the
time, citing the desire “to be subject to one set of listing regulations instead
of two.” Hauser on Monday dismissed the explanation, saying it was exempt from
reporting requirements under local regulation, arguing that both economic and
Zionist values should encourage it to stay.
“These kinds of companies
have the ability to enhance the role of the Tel Aviv Stock Exchange and
contribute to economic growth in Israel,” he said.
Mellanox is not alone.
Wix, a successful Internet start-up that helps companies put together websites
with ease, announced on Tuesday that it filed forms with the US Securities and
Exchange Commission in order to go public there.
Berkshire Hathaway scooped up the Iscar metalworks company in May, and,
according to the rumor mill, Apple, Google and Facebook have each tested the
waters to buy Waze, a crowd-sourcing map application.
The CEO of the
stock exchange, Ester Levanon, promised to follow the committee’s
recommendations and do whatever was necessary to carry them out.