There’s no reason for Israel to remain an exit nation, where promising young companies’ first option is to get bought out by a foreign company, Tel Aviv Stock Exchange’s new CEO Yossi Beinart said.
Beinart believes that he can create an ecosystem that makes it easier and more attractive to go public in Israel rather than look for an exit or to go running off to the NASDAQ instead.
“It’s very possible they’re being sold too early because they can’t do the natural thing of growing up themselves, and this is who I’m trying to cater to,” Beinart told The Jerusalem Post in an exclusive interview this week.
The Israel Securities Authority released a report last year that found that 95 percent of Israeli start-ups preferred an exit to a local initial public offering, which would help them develop into large companies.
ISA chairman Shmuel Hauser laid much of the blame at the TASE leadership’s feet, and pushed out former CEO Ester Levanon and chairman Sam Bronfeld late last summer.
Beinart, who had previously run the Chicago-based North American Derivatives Exchange, was picked to take over in October, and outlined his vision for the exchange to the Post in one of his first on-the-record interviews since stepping into the position in January.
“The vision in some way has to include an analysis of what it takes to grow a regional, or in our case, a country exchange. If you look at exchanges worldwide, a lot of the small ones are struggling,” he said.
“What happens in Israel is one of two things. Either companies can get sold early, because they can’t do anything at that point, or they find a market, and the market they find is potentially the [London Stock Exchange’s] AIM and... question mark. And this is where we come in,” he added.
Companies that want to grow should have options. What would have happened if Facebook, for example, felt it had nowhere to grow, and decided to take the 2006 Yahoo offer to buy it for $1 billion? The TASE can hit the sweet spot for companies that are too small for listing abroad and want to grow here, Beinart said.
If a $1b. company, large by Israeli standards, decides to list on NASDAQ, he said, “you’re still a very small fish in a very big pond.”
A company even half that size that lists in Israel can get onto the indexes of large companies on the exchange and tracked on exchange-traded funds, leading to more liquidity.
Aside from specializing in size, the TASE should also seek to specialize in the types of companies it lists.
“Israel is known for biotech and tech, so we should concentrate on helping companies in this sphere list here,” Beinart said.
By offering special analysis and services to companies in those fields, the exchange can build an ecosystem that may help specializing companies get a better valuation here than elsewhere, he said.
“If you provide analysis in the R&D sector, in biotech and technology, eventually there will be a cadre of analysts that are in Israel who know the companies, and if analysts know the companies, the institutions will know the sector, and if the institutions know the sector they will potentially give you a better valuation,” he said.
In Toronto, for example, the stock exchange has pulled off a similar feat in the field of energy technology.
Beinart wants to open up the exchange to more activities, offering the ability to trade companies that are not listed, he said.
“Outside of Israel the listing, trading and clearing are unrelated – they don’t have to happen in the same place. It’s not a function of one company or exchange,” he said. “Why should it be different here?” In that vein, on June 9, a cooperation deal between TASE and Deutsche Boerse’s Eurex is to go into effect, which will allow Eurex to list and clear futures based on the TA-25 index, comprised of the biggest 25 companies on the exchange.
Read the full interview, which includes Beinart’s take on his predecessor’s legacy, thoughts on inequality and thoughts on what regulations need to be fixed to help Israeli companies grow, in Friday’s paper.