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(photo credit: Courtesy Photo)
Israeli hi-tech and health care companies continue to make their way to list on the Nasdaq market in the US even as a rush of other local companies complete successful initial public offerings on London's Alternative Investment Market and the London Stock Exchange.
"In the past many Israeli companies might have thought that they were too small to list on Nasdaq or were discouraged by Sarbanes Oxley requirements," said Assaf Homossany, managing director of Nasdaq Israel in an interview with The Jerusalem Post. "But in recent months, we have seen that Israeli small- and medium-sized companies have acquired more of an understanding of the long-term benefits the Nasdaq market can offer them and thus are more mature to weigh up the costs of coming to our market."
The US market has been losing market share from foreign companies mainly due to the costs and booking practice requirements demanded by the Sarbanes Oxley Act, which requires extensive financial and accounting disclosure.
"Nasdaq has lost a lot of market share from foreign companies, though much less from Israeli companies," said Josh Kiernan, Partner and head of White & Case's Israel law practice, which advises many Israeli companies on Nasdaq and European stock exchanges.
White & Case last year advised on IPO listings on the Nasdaq by two Israel-based hi-tech companies - the $73 million SEC-registered IPO of Ituran Location and Control Limited, a leading provider of location-based services in October 2005 and Saifun Semiconductors Limited in its $135 million SEC-registered IPO in November.
In recent months, the Nasdaq has put much effort into promoting its benefits and in improving its services to foreign companies and in particular those from Israel. With more than 70 IPOs under its belt, Israel has more companies listed on Nasdaq than any country outside North America.
"We provide better services post the IPO process than other markets in terms of analyst coverage and liquidity problems. Our competitive edge is that our relations start with the IPO and do not stop there," said the Israeli-born Homossany during his stay in Israel to visit Nasdaq-listed companies.
Kiernan noted that more and more Israeli companies were listing on the more accessible AIM market but he said the majority were real estate companies and those companies with "no business connections to the US and thus they would not be attractive to US investors."
He believes, however, that Nasdaq will continue to be the better and preferred market for quality Israeli technology and health care companies.
Among the daring smaller stars on the horizon aiming for the US market is Israeli startup Foamix Ltd. The maker of foams used for drug delivery, which have been cleared by the US Food and Drug Administration, plans a US or European initial public offering in the next 12 months.
"There are obvious advantages for companies to list on Nasdaq, if their core business is in the US, like ours. There are more opportunities for raising long-term value. Analysts' coverage is higher which attracts more appetite from investors," said Meir Eini, co-founder and COO of Foamix.
Eini noted that the downside of Nasdaq was the amount of data, information and management time and costs involved.
"If you want to be big you have to spend that time and money," he said.
Dov Tamarkin, co-founder and CEO of Foamix said that although no decision had been made yet, Foamix would fit on the Nasdaq market with regard to its business and technology.
Other Israeli companies making their way to Nasdaq are Wintegra and most recently Ormix Biopharmaceuticals Ltd. Wintegra, which counts among its investors Marvell and Texas Instruments, filed its registration with the SEC in February. The company hopes to raise $86m. at a company valuation of $300m. to $350m. Ormix, meanwhile, announced last month that it planned to raise $55m. on Nasdaq at a company value of between $215m. and $243m.
In an opposing trend, Israeli companies with less potential attraction to US investors have recently found more value in the flourishing mergers and acquisition market than in making an IPO.
In October 2005, Ramat-Gan based Predix Pharmaceuticals Holdings Inc. tried to go public on Nasdaq at a company value of $230m., but withdrew the IPO on the grounds that market conditions were not conducive to success, as demand for the shares was reportedly less than half the $50m. the company had hoped to raise. Predix found a better solution to raise its value - just announcing a deal to be acquired by Nasdaq-listed Epix Pharmaceuticals Inc. for $90m.
Most recently, semiconductor pioneer Passave Technologies, was bought by US company PMC-Sierra for around $300m. Passave had previously filed for an initial public offering on Nasdaq to raise $90m. at a company valuation in the range of $300m. to $400m. The share offering was to be postponed because of a lawsuit by a large US customer, UTStarcom.