Australia Securities Exchange eases terms for dual listing of Israel tech firms
ASX recognizes Tel Aviv Stock Exchange rules, reducing compliance burden; in September, payments firm Splitit became 1st Israeli company to enter a Down Under index
Shoshanna Solomon was The Times of Israel's Startups and Business reporter
Companies that are listed on the Tel Aviv Stock Exchange (TASE) and are seeking to list their shares on the Australia Stock Exchange (ASX) as well will now find it easier to do so, as the ASX now sees Tel Aviv as an “acceptable home exchange.”
This latest development reduces the compliance burden for TASE-listed companies that seek to list their shares both on the TASE and the ASX, said Max Cunningham, executive general manager of Listings at the ASX.
The ASX will recognize the rules that the TASE-listed company is already complying with for the purpose of listing on ASX, and the company won’t have to comply with two separate rulebooks, he said in a phone interview from Sydney. “Dual listings could already take place. But this makes it easier.”
TASE now joins exchanges such as Deutsche Börse, Frankfurt, Hong Kong, Tokyo, Toronto, NASDAQ, New York and New Zealand as acceptable exchanges under ASX rules, he said.
Cunningham spoke to The Times of Israel with the coronavirus ravaging economies globally, and with Israel in its second lockdown. The spread of the coronavirus has contributed to a slowdown of Israeli firms seeking listings in Australia, mainly because ASX officials have not been able to visit Israel to drum up business as they have been doing since 2016.
“With Israel it is a little bit of a challenge, not being able to be there,” Cunningham said. Getting new listings from the US has been easier, because the ASX has people on the ground there all the time.
Even so, Cunningham expects to see “between two and three potential Israeli initial public offering of shares between now and the end of the year.” Exchange officials are also “engaging in conversations” with a couple of additional firms as well.
Twenty Israeli companies have to date listed shares on the ASX since 2011 — some of which have seen their stock surge, while others have seen a plunge in value since their listing. Those companies that have executed larger IPOs and have been able to attract a larger pool of investors have “invariably performed better,” as their businesses is more developed and their risk was lower pre-IPO, Cunningham explained.
Audio Pixel Holdings Ltd., a digital speakers maker, for example, which issued shares on February 1, 2011, at a price of $3.85, saw its shares surge 483% by August 31, 2020, according to data provided by the ASX. Similarly, Splitit, a tech firm providing payment solutions, has seen its shares surge 830% from its IPO in January 2019 to the end of August 2020.
First Israeli on Aussie index
Because of its share price surge and the jump in its market value, which on August 31 reached almost AUD 727 million ($518 million), Splitit has become the first Israeli company to be added to an Australian stock index, when it was included in the exchange’s new tech index.
Entering the index allows Splitit to be the first Israeli firm to benefit from funds of Australian institutional investors, Cunningham said.
“Splitit has been transformational, as it is the only Israeli company that has widespread institutional support,” he said. Previously the Israeli companies that came to the exchange largely relied on the funds of retail or individual investors, he said, because they were smaller companies and raised a small amount of money on the exchange.
Splitit, which entered the new index on September 21, is showing the way for other Israeli companies to benefit from institutional funds, once they are eligible for entry into an index, Cunningham said.
“I think the institutions that are investing in Splitit are getting to see Israel through the same eyes that we have seen Israel,” he said.
The ASX launched the S&P/ASX All Technology Index on February 24, just weeks before the coronavirus started to spread in Australia. “It had a terrible birth,” Cunnigham said. “It went up a bit and then fell away with the rest of the market – dramatically so.”
But once global markets turned around, and especially the tech shares, the S&P/ASX All Tech Index rallied, and local funds are investing in the index, Cunningham said. The index has a market capitalization of some AUD140 billion. The index today comprises 58 companies: 48 from Australia, five from the US, three from New Zealand, one from Ireland and one, Splitit, from Israel.
The launch of the index is perhaps the apex of the strategy the ASX has been pursuing for a number of years — to get more tech firms onto its exchange, which had been focused mainly on natural resources and commodities firms. Drumming up listings from tech firms in Israel, seen as a global technology hot spot, was a key part of that effort.
“The tech strategy we have been focused on for many years now, and that Israel is part of,” has come to fruition this year, Cunningham said, “when so many important ingredients have come together.”
“We finally had this year what we thought was a real critical mass of tech companies listed on ASX to launch a dedicated tech index,” he said.
The index was launched with a market cap of AUD$100 billion. The index had a quarterly rebalance in June, and four firms were added in September to the index, including Israel’s Splitit.
Not all Israeli firms that have listed on the ASX have done well, however. G Medical Innovations, a developer of health monitoring solutions, which listed its shares in May 2017, has seen its stock plunge 80% from its IPO to August 31, 2020. Roots Sustainable Agricultural Technologies, which listed its shares on the exchange in December 2017, saw its shares drop 76%. AppsVillage, a mobile apps development company, saw its shares plunge 45% from its IPO in August 2019 to August 31, 2020.
The smaller companies with higher risk associated with their businesses have performed less well, said Cunningham. They have also been more impacted by COVID-19.
“A lot of smaller companies are reliant only on retail shareholders which makes it hard to gain access to emergency capital during COVID,” he said. “Typically, these are companies with smaller and less developed business models.”
Though there is just a trickle of companies coming to list from Israel at the moment, the ASX is seeing a “heavy load of IPOs coming to market between now and the end of the year” from Australian, New Zealand and US firms, Cunningham said. These will be mainly tech sector and gold mining firms, as both tech and gold are doing very well amid the economic turmoil caused by the coronavirus pandemic.
“In times of uncertainty tech stocks have done very well because they don’t require a lot of capital, and gold is always is a store of wealth,” he said.
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