The Nasdaq and the New York Stock exchange may the most aspired-to destinations for many Israeli entrepreneurs, but Canada is now joining Australia in competing for a piece of the pie.
“Israel is second only to California in terms of success in the tech space,” Robert Peterman, VP of global business development of the Toronto Stock Exchange and Venture Exchange, said in an interview with The Times of Israel last week. “If we want to be a relevant tech player,” Israel is the place to be, he said.
Peterman was visiting Israel as part of a 12-member Canadian delegation made up of investment bankers, lawyers and accountants in a bid to drum up business from local technology firms that are looking to raise public funds abroad.
The delegation focused on one-on-one meetings with Israeli firms to raise awareness of Canada’s two-tiered stock market system – the main TSX exchange and its Venture exchange for smaller and riskier technology companies.
A delegation of the Australian Securities Exchange (ASX) will also be attending meetings in Tel Aviv this week, with a similar agenda, making it the fourth visit by ASX exchange executives to Israel in the past 12 months. Sixteen Israeli companies have listed their shares on the ASX, including eight new listings in 2016 and four this year so far, according to data provided by the ASX, making Israel the country with the fifth-highest number of foreign shares traded on the exchange.
As of end 2016, there were some 94 Israeli companies listed on the Nasdaq, with an aggregate market cap of $70 billion.
“If you are not big enough to go public in the US but you are a growth company that can benefit from doing acquisitions, tapping into investors, the ability to do financing quickly and at a less dilutive rate as you are growing, this is a unique opportunity for you to grow your company,” Peterman said.
Over the last five years Canada, a country blessed with natural resources, has been pivoting its ecosystem around technology, with private equity and VC fund investments rising. Total Canadian VC investment in 2016 totaled $3.2 billion over 530 deals, representing a 41 percent year over year rise in dollars invested, according to the Canadian Venture Capital and Private Equity Association.
In addition, the exchange’s tech index, which includes the technology stocks listed on the exchange, “has been the best performing part of our index,” Peterman said. The exchange is now looking to expand its technology offering to investors.
An appetite for technology firms
“Investors are more interested in technologies so our timing is about the growth we are seeing in Canada and the opportunity to take our unique financing capabilities to the world,” said Peterman.
Canada is also seeing an opportunity to make the most of US President Donald Trump’s anti-immigration policies, which have raised the hackles of the tech community in the US as well as globally.
“Canada has gone a different way than the US,” said Peterman. The country has chosen “openness to the world.”
There are some 250 foreign companies listed on the TSX and TSX Venture exchanges, more than half of them from the US.
“The exchange is the number one destination for US companies outside the US market,” said Brady Fletcher, managing director of the TSX Venture Exchange, who was also part of the Canadian delegation.
As of September 30, 2017, there were six Israeli companies listed on TSX and Venture with a total market capitalization of approximately $2.5 billion. These included Siyata Mobile Inc, a provider of cellular communications systems which listed in July 2015 and has seen its market valuation rise from $7 million at the time of the listing to some $41 million as of end of day October 27. Its shares have advanced some 128 percent in the past 12 months.
Real estate firm Gazit Globe Ltd. and Baylin Technologies Inc. listed their shares on the TSX in 2013, while Vaxil Bio Ltd., which develops immune-oncology treatments, listed shares in 2016. Baylin shares have declined 7 percent in the past 12 months, bringing the firm’s market cap to close to CAD 43 million ($34 million) while Vaxil shares, traded on the Venture exchange, have plunged 57% over the past 12 months, to a market cap of CAD 3 million.
There were 87 new corporate listings on TSX and Venture during the first three quarters of 2017 across a broad range of industry sectors, including technology, life sciences and consumer products, according to data provided by the exchanges.
“Investors have an appetite for tech companies and the rise of ICOs and crowdfunding is demonstrating that investors want to participate in the growth side of these businesses, they want to participate early on,” said Fletcher. “If a company stays private, and is financed just by VC, retail investors and small cap individuals can’t participate in that growth. The Venture exchange allows these individuals to participate in these higher growth opportunities.”
Listing in Canada costs less than listing in the US, Peterman added, the process is quicker and companies don’t need to have the huge valuations required when listing in the US, he said. Regulation is also easier, and the companies have access to the same pool of investors as in the US. Canada also offers a competitive amount of local investment bankers and analyst research coverage, said Peterman.
The Canadian delegation met with more than 22 Israeli companies during their visit to Israel last week and “people are interested in options for funding,” said Peterman. “There is a pipeline of companies we are talking with.”