Accessing international capital

The investor relations strategy.

The presence of Israeli companies in global capital markets has reached an all-time high. In past years, especially in the 1990s, Israeli companies seeking to make an international public offering looked to the US where investors were quite receptive to Israeli high technology companies. At the end of the 1990s, the Tel Aviv Stock Exchange's dual listing process encouraged Israeli companies already trading on US exchanges to also list in their home market. Over the past two years, a new situation has emerged. Increasing numbers of Israeli companies have begun to explore the London capital markets mainly because of the changed regulatory environment in the US. In London, there are currently three relevant markets where international companies can raise capital. For small companies seeking £1 million - £2 million, the OFEX offers a sufficiently attractive market. In the past year, several international companies, including one Israeli company, have taken this course. The Alternative Investment Market (AIM) provides capital for small to medium-sized international companies. The AIM is considered a stepping stone to the main market and, after two years of trading, companies can move up a level to the London Stock Exchange. The London main market is the most international of all stock exchanges having, to date, attracted more than 350 companies from over 50 countries. The US also offers opportunities for small and medium-sized international companies to reach the capital markets. The American Stock Exchange (Amex) offers a unique platform for young Israeli companies. Since most publicly traded companies do not have multi-billion dollar market caps, millions of shares traded daily and constant investment banking activity, Amex fills a strategic niche by partnering with these companies to help create value for both management and shareholders. The Amex’s market structure and supportive services are designed to broaden a company’s exposure to the investment community, making it easier to obtain funding internationally. Whatever route is chosen, it can take an Israeli company some four to six months to complete the IPO process. Going public on AIM, for example, involves the appointment of an advisory team that includes solicitors, a reporting accountant, a sponsor, a nominated adviser or corporate adviser, a stockbroker, a share registrar, a printer and an investor relations (IR) consultant. How an IR strategy can make all the difference An investor relations adviser manages the diverse levels of communication between a public company and its varied audiences, including existing and potential investors. It performs its services both before and after the IPO in an effort to maximize the firm's equity valuation. One of the essential steps in accessing capital is telling the company's story delivering to the market the most accurate picture of company performance and prospects. Moreover, for an international company, without any presence in the capital market, it is crucial to address and manage the expectations of the target audience abroad. International companies must build shareholder value by establishing relationships and effective communications within the capital market community. Such activity is highly complex and needs to be handled strategically and professionally. It should be led by a local contact person, familiar with the systems and dedicated to maintaining relationships within the financial market. The most important investment community contacts for company management are institutional investors, analysts, fund managers and brokers. Furthermore, the company needs to tell its corporate story to the financial media via a variety of communication channels, including the written press, Web-based media, television and radio. Finally, and very significantly, the company needs to attract and sustain the attention of commercial contacts such as existing and prospective customers, partners, employees and competitors. The proper management of these can provide a positive pattern, encouraging investors to track and buy the company's shares. The UK market has traditionally been more responsive to IR than has the US market due to a "quiet period" imposed on new issuers in the US. The quiet period extends from the time a company files a registration statement with the SEC until SEC staff declares the registration statement "effective." During that period, the securities laws limit the information that a company and related parties can release to the public. On December 1, 2005, the SEC adopted modifications to the registration, communications and offering processes under the Securities Act of 1933. The new rules update and liberalize permitted offering activity and communications to allow more information to reach investors. Creating and sustaining momentum A public company should seek creative ways to maximize its international listing, while creating value for its shareholders. Developing momentum within the business community prior to the IPO is crucial. The IR team will strive to increase shareholder value and investor interest, as well as orchestrate the correct corporate identity, which can have a huge impact on the success of the IPO. In order to generate a favorable market position throughout the IPO process, management should work closely with the IR consultant to market the company's investment story to key audiences. It should maintain consistency of the message and manage the investment community's expectations regarding corporate performance and company developments. Also, while new shareholders are essential to building shareholder value, a company should not ignore or take for granted relationships with existing stockholders. The IR consultant needs to provide strategic recommendations and coordinate meetings to ensure that existing shareholders remain committed to the company. Ultimately, the IR objective is to support management's efforts to maximize investor awareness and build market capitalization for a foreign-listed company. The IR team can skillfully tell the client's story to the proper audiences by developing programs based on individual needs. The overall effort is to generate not only investor interest, but maximum investor commitment. A company cannot afford to neglect this aspect of the process, as ultimately it will impact on the success of the IPO. For more information: Ms. Amira Bardichev +44-7956206270; amira@global-equity-ir.co.uk

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