Israeli firms are confidentially filing prospectuses with the US Securities and Exchange Commission ahead of potential initial public offerings of shares as they wait for an auspicious time to go forward with such a move, according to US investment bank Aegis Capital Corp. and international law firm Zag/S&W, which work with technology companies on their share offerings.
“When the IPO window opens, you can put a lot through,” said Robert Eide, the founder and chief executive officer of Aegis Capital Corp., which manages $4 billion in assets, in an interview at the offices of ZAG/S&W in Tel Aviv on his recent, and first, visit to Israel.
Eide estimates his bank will see some eight to 15 primary and secondary placements of shares in the US markets during 2017. “We are meeting with a number of companies,” he said.
Last year total tech exits globally witnessed a 4 percent decline compared with 2015, with a total of 3,260 merger and acquisition deals and 98 initial public offerings globally, according to New York-based data company CB Insights. The number of IPOs fell by 16 percent year-over-year in 2016, according to EY’s Global IPO Trends report, as political and economic uncertainty in 2016 shook the confidence of both entrepreneurs and investors and put initial public offerings on hold.
“2016 was a tough year because no one really knew where the market was going and companies and banks like clarity,” said Eide. When you have market volatility, “it may be good for trading but it is very hard for companies to get a handle on whether they should take capital now, whether they should issue debt, whether they should issue stock. It becomes more challenging.”
The United States took the number one spot with more than 1,600 tech exits in 2016, according to CB Insights’ 2016 Global Tech Exits Report. European markets like the UK, Germany, France, Sweden, and the Netherlands were among the countries with the top 10 exits rankings. Israel ranked tenth by number of tech exits in 2016.
Israeli tech exits — both merger and acquisitions and IPOs — reached a total of $10 billion in 2016, with 93 M&A deals, eight buyouts and just three IPOs. The low number of IPO deals, totaling just above $15 million, made 2016 the year with the second-fewest IPOs in the past 10 years, according to data provided by Israel’s IVC Research Center and attorneys Meital Liquornik Geva Leshem Tal. In 2014, by comparison, Israeli tech IPOs reached a record $2.1 billion in 17 deals.
IPO activity however picked up in the second half of the year, with 17 US tech IPOs compared to the first half of 2016 which saw 8 tech IPOs, CB Insights firm said.
Aegis, together with the law firm ZAG/S&W, has consulted, invested in, and provided investment banking services to many Israeli companies over the years.
The US investment bank has helped Israeli life science and technology companies’ gain access to the United States’ capital markets, enabling them to raise more than $160 million over the past five years, including the Nasdaq IPOs of Alcobra in 2013 and of BiondVax in 2015 .
Its venture capital arm, SternAegis Ventures, has invested in companies like Prolor Biotech, Inc., bought by Opko Health for over $500 million, DarioHealth Corp., which was one of the three Israeli companies that listed securities on the Nasdaq in 2016, and most recently Motus GI Medical Technologies Ltd.
You only know what happened in 2017 in 2018
“Our bank has the desire to be on the leading edge of the medical field and technology,” said Eide. “It takes a long time to get to really know a company. Our approach is to grow with it and help it as it achieves its milestones,” he adds.
The Trump presidency could lead to lower regulation and taxes, and that could persuade more companies to offer their shares on the US stock exchange. “If Israeli companies really want liquidity to grow, then they have to be on US exchanges,” he said.
Zag/S&W was the law firm that represented all three Israeli companies — DarioHealth, Nano Dimension and Cellect Biotechnology — that got listed on Nasdaq last year, said Oded Har-Even, managing partner at Zag’s US offices. “Hopefully, the IPO market will open in 2017, but you never know.”
As tech companies continue to mature there are increasing calls by investors for companies to go public, and this is accompanied by a slowdown of funding from “deep-pocketed investors” like mutual funds and hedge funds in financing late-stage startups. So “the drumbeat for a busier 2017 is getting louder,” CB Insights said in its 2017 Tech IPO Pipeline report.
“The only way you will know what happens in 2017 is in 2018, to be honest,” said Eide. “Any macro event may occur that may either help or hurt the environment of which we have no control over. But with US plans to reduce regulation and taxes, we think the opportunity right now is unique.”