The Israel Securities Authority is investigating whether Delek Real Estate Ltd. (TASE: DLKR, controlled by Yitzhak Tshuva, made improper accounting measures to inflate the value of foreign properties. On Thursday, Securities Authority investigators raided the company's offices in Ramat Gan, and questioned CEO Eran Meyital and CFO Daniel Leventhal.
The events under investigation occurred before either man was appointed to his present post. Delek Real Estate's share fell 4.3% by mid-afternoon on the TASE to NIS 3.60, giving a market cap of NIS 187 million. The company's three bonds traded on the TASE fell by 2.5-4.4%.
Delek Real Estate confirmed the raid in a one-line notice to the TASE today.
So far as is known, the Securities Authority opened the investigation several weeks ago in the wake of the sudden resignation of former CEO Yarom Oren, who replaced longstanding CEO Ilik Rozansky in July, after his eight years in the job. Delek Real Estate went public during Rozansky's tenure.
Oren resigned only six weeks after his appointment, saying that he lacked the necessary experience in real estate. The claim startled the market, since his appointment was no hasty act, but came after the company's appointment's committee reviewed him and other candidates, and given the fact that Delek Real Estate is obviously a real estate company. The Securities Authority was skeptical about Oren's stated reason for his resignation.
Suspicions grew after Oren gave an interview shortly after his resignation, in which he said, "No one knows what the company's future will be. That will depend on a lot of things, including whether it made reasonable transactions."
The third act that aroused the Securities Authority's suspicions was an interview with "Globes" by Meytal. He revealed that he intended to launch an aggressive sell-off of properties to the tune of several billion shekels. The sell-off implies trouble at the company.
Delek Real Estate said in response, "Delek Real Estate is cooperating in full and with understanding with the Securities Authority. The company is doing, and will do, everything in its power to ensure that the Securities Authority's investigation concerning a number of properties of foreign subsidiaries will be concluded as quickly as possible."
Yitzak Tshuva owns 50.74% of Delek Real Estate, and Bank Hapoalim (TASE: POLI) owns 9.68%. The company's foreign subsidiaries include Delek Global Real Estate Ltd., which delisted from London’s Alternative Investment Market (AIM) earlier this year.
Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2009
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