The trend of Israeli companies listing on the European stock markets is not expected to see a rushed comeback in 2008, as the US market comes back into vogue, said stock market representatives this week.
"The trend of IPO activity we saw in 2005 and 2006 targeting European markets is not expected to continue this year or in 2008 as the US seems to be back in vogue," said James Posnett, managing director of European products at Eurolist and Alternext, at the Go4Europe Conference organized by Cukierman Investment House Ltd. in Tel Aviv.
"In previous years, companies were drawn away from the US by the costly Sarbanes-Oxley listing regulations and concerns over risk of litigation."
In 2005, some 20 Israeli companies went public on the European market - mainly on the Alternative Investment Market (AIM) - compared with only four in the US. In 2006, the number of offerings of local companies on the European stock markets fell to 16, compared with eight offerings in the US.
Joel Plasco, CEO of Collins Stewart, agreed that the AIM market had recently lost some of its sparkle.
"There have been some bad experiences with Israeli companies and as a result of negative comments, UK investors have not been so much attracted by Israeli companies," said Plasco on Thursday at a seminar on the future of the AIM and the LSE.
"The London market is attractive for Israeli companies geographically, in terms of the timezone and core business. but the market needs Israeli superpower companies like Checkpoint or Cellcom, which are considered the crÃ¨me de la crÃ¨me in the US with a fantastic expertise and knowhow. It's not about Israeli companies, it's about good companies."
Mark Green, director of Collins Stewart in Israel, added that many Israeli companies were attracted to the US stock market due to the presence of US investment banks in Israel, which have provided many companies with a better idea of how to handle the US market.
"You need to know how to play the game," Green said. "Israelis know how to play the game in the US, which is a much more aggressive market, but they haven't quite learned the rules of the game in the UK, which among others, is also about cricket."
At the same time, the performance of the 15 largest Israeli companies traded in Europe showed that since the third quarter of 2006, they have been outperforming the index of European companies traded in the same European exchanges.
"Israeli businesses have been good at pitching the right sectors such as real estate and online gambling," said Graham Dallas, Senior Manager at the London Stock Exchange. "Looking ahead to 2008, scale is going to be important; we are likely to see more of the large companies coming to float on the LSE and less on the AIM compared with the trend we saw in previous years. We see much potential for Israeli companies in the fields of alternative energy such as water technology and cleantech."
Others, however, disagreed with Dallas's approach. "Cleantech is a buzzword, but I don't think we will see cleantech flotations in the near future as most of the companies are not mature enough," said Yaron Har-Zvi of Ernst & Young Israel.
"There is real appetite for Russian real estate in London, growth is expected to come from investment into the Far East, in particular, India. Thailand and Vietnam, and from resources in light of the rise in commodity prices," he noted.
Dallas added that the strength of the pound sterling was having an effect on companies going public.
"It is horribly expensive to do anything in London and as a consequence fixed costs and support and legal fees are higher and negotiations are very tough," he said. "The center of the world is moving away from the US and Europe to China and India. Our real competition is Shanghai."
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