In wake of the wave of IPOs by biotechnology companies in recent weeks, the Tel Aviv Stock Exchange (TASE) yesterday announced changes in the rule for registration of companies, in order to make it easier for R&D companies to list for trading. The changes were made in consultation with leading underwriters. The TASE management made four changes, with the aim of encouraging companies to hold issues on the TASE, instead of trying their luck on foreign bourses. The Israel Securities Authority still has to approve the measures.
The TASE has redefined an R&D company. Until now, an R&D company was defined as a company that had invested at least NIS 3 million in R&D in the three years preceding an IPO; the new definition states that this sum may include both investment in R&D from the company’s own sources and money received from the Office of the Chief Scientist.
In order to encourage investment institutions to participate in issues of R&D companies, the TASE also decided to halve the minimum amount an institution must buy in the IPO of an R&D company to NIS 400,000.
Because of low demand by investors for IPOs of R&D companies, the TASE decided to reduce the minimum required number of investors following an issue to 35, while the holding of each investor was left unchanged at NIS 16,000. Under current regulations, there must be at least 100 investors in a newly floated company. This amendment is derived from the law applying to bond issues, which have a threshold of 35 investors at the time of the issue.
The fourth amendment halves the required minimum public holding in an R&D company to NIS 16 million. The TASE says the reduction in the immediate stake was made because R&D companies would probably hold many financing rounds; it was therefore proposed to allow them to hold an IPO at a fairly low dilution. The public’s required holding was set at 10% of total shareholders’ equity.
TASE Economic Department SVP Ronit Harel Ben-Ze’ev said the measures were designed to encourage new high-tech companies, in view of the fairly low representation on the TASE.
“High-tech is called Israel’s growth engine. The TASE therefore decided to encourage R&D by making it easier for companies to raise capital on the home court, too,” said Ben Ze’ev. She added that a TASE IPO would provide finance for high-tech companies, and could be a springboard for a subsequent issue in the US or Europe.
Published by Globes [online], Israel business news - www.globes.co.il - on September 5, 2005