Latest Israeli IPO’s shares jump 40% in one day

The latest Israeli company to go public, Kornit Digital, saw its stock climb 40% from its initial offering on April 1. The company offered 7.1 million shares at $10 each last Wednesday, and by Thursday the shares had climbed to $14.

That $14 share level was the price at which analysts had expected the stock to be offered for in the first place. Kornit was apparently set to offer its shares on the NASDAQ at between $13 and $15 per share. The company did not say why it discounted the share price.

Nevertheless, analysts were bullish on the Israel digital printing company’s prospects. The Rosh Ha’ayin-based firm is one of the world leaders in modern direct to garment printing, converting a business that had long relied on messy and limited dyes and inks to a clean, neat, method of garment printing that gives manufacturers many more options for producing garments with text and graphics.

Like photocopying – once done on the now-outmoded mimeograph machine – garment printing has undergone a revolution in recent years. Once, T-shirts and sweatshirts with design or text on them were created using a screen printing process, but increasingly, garment manufacturers are going for DTG – direct to garment – printing systems. Kornit, established in 2003, was the first company to apply the principles and methods of digital inkjet printing to garment production, and is today the biggest seller of DTG printing systems.

DTG has a lot of advantages over screen printing, say industry experts. DTG allows the use of multiple colors in a printing run, while screen printing – which is done by pushing ink through a woven mesh stencil onto fabric – allows for only one color per run. Designs are generally very simple as well, because the geometrics of the mesh stencils don’t allow for advanced designs. On the other hand, screen printing is generally cheaper than DTG.

Nevertheless, prices on DTG systems have come down steadily over the past decade, with commercial machines now available for well under $10,000. For new companies that don’t already have screen printing systems, it’s now cheaper to set up shop using a DTG system than a screen printing apparatus, which is more expensive than a printer.

Kornit is also a pioneer in producing non-toxic, water-based inks that can be used for printing. Leftover ink is generally just dumped by many manufacturers using screen printing, with the oil-based ink, along with other chemicals, ending up in local water supplies, a number of university studies in the US have shown. According to Kornit, its NeoPigment inks “are safe enough for infants and babies” who often put the colorful designs on bibs and shirts in their mouths.

One thing that makes the company an excellent investment, according to analyst site Seeking Alpha, is the uniqueness of the Kornit solution. “As a pioneer in its particular niche within the textile industry, it doesn’t have any outright competitors at the moment since it is catering to small-run designers and is not targeting large, mass-market, textile companies.”

As the technology improves, the site added, Kornit’s “obvious future competition could likely come from the digital printing arena, i.e. companies like Hewlett-Packard.” For now though, the site noted, “Kornit has certainly established itself as a profitable entity in a low-margin industry. Given its niche market and ability to customize printing systems for clients via software, the company has the means to continue at a strong pace in the near term, provided that its margin minimums for ink are maintained.”