David Enzer Managing Partner at Roth Capital Partners.
(photo credit: Courtesy)
“Over the coming year, at least six Israeli venture-backed companies will hold
successful IPOs on Nasdaq. Investors are showing interest in Israeli technology
companies, and I believe there’s a big opportunity here,” said David Enzer, a
managing director at US investment bank Roth Capital Partners, which specializes
in banking services for small-cap companies.
Enzer will be in Israel at
the end of the month, to participate in the Ernst & Young-Globes Journey
Conference. In an exclusive interview with Globes, he said: “In the next year,
there will be a revival of interest among US investors. We are seeing
extraordinary Israeli companies, particularly in semiconductors, media and
Roth Capital, based on the West Coast, was founded
in 1984. In the 1990s, it was an underwriter for IPOs by smallcap companies.
With the changes that the public market underwent, it began to promote PIPE
(private investment in public equity) financings. Given recent SEC rule changes
allowing shelf offerings for small-cap companies, Roth is very active
Roth was also one of the first banks to offer services to small
Chinese companies active in the United States and traded there. It is a
full-service investment bank, active in fund raising, research coverage,
trading, and mergers and acquisitions. To date, Roth has helped its customers
raise $10.6 billion, and it has been involved in 150 mergers and acquisitions.
Since 2003, Roth has completed more than 67 deals worth a total of $2.8b. in
Chinese companies listed in the US.
The first deal in which Enzer was
involved in Israel was the financing of ART Advanced Recognition Technologies in
1998. The company was sold to Nuance Communications in 2004. Roth Capital itself
has been involved in various kinds of deals with 10 other Israeli technology
companies, among them Nova Measuring Instruments Ltd., Lanoptic, EZchip
Semiconductor Ltd., Pluristem Therapeutics Ltd. and Orckit Communications Ltd.,
and also in non-technology companies, such as G. Willi-Food Investments
Ltd.Given your optimistic outlook, do you understand why there are those
ready to write off Israeli hi-tech and venture capital?
“I’m surprised to hear
it. From here, it looks as though there are exciting companies in the Israeli
market, and as though there will be no shortage of investment banks that will
want to take them public.
“I hear that the atmosphere is sour, but we see
in Israel opportunities and successful companies, chiefly in semiconductors and
infrastructures. They have a fantastic business. Some of them are growing
at rates in the hundreds of percentage points, don’t need money and look like
they will become market leaders. I’m talking about companies like BroadLight,
Siano and Provigent.”
According to Enzer, Roth’s advantage is its
experience in providing services to small companies.
“We don’t work with
companies that have valuations of billions of dollars,” he said. “Over the
years, we have mostly led managed deals for small-cap companies that have market
caps of $100 [million] to $500 million. We know the market very well, and we
know the fund managers that care about small caps; there are a lot of
them.”The fear is that Chinese companies will take the place of the
Israeli companies that used to reach Nasdaq in the past.
“If you look at
the Chinese companies that have made successful IPOs, you’ll find that most of
them are consumeror industrial-services companies, and not necessarily
technology companies. They attract a certain kind of investor. Investors
who seek technology companies look at companies in Silicon Valley and in
Enzer does not sound concerned about the high threshold set by
Nasdaq for companies that want to join. He believes “the market will now switch
to growth,” adding that “there are many good, promising
Despite the lack of clarity in the capital markets, there is
a list of 100 companies registered for IPOs, a third of them technology
companies, he said, adding, “Companies with revenue of $40 [million] to $50
million are already on the runway.”The feeling is that only profitable
companies, with annual revenue in the hundreds of millions of dollars, are fit
to make IPOs.
“There are several companies registered for flotation with
revenue of $50 million, most of them growing impressively, and investors also
want to see positive EBITDA.
But even companies close to profitability,
that show future growth and will be profitable within three to four quarters,