BATM Advanced Communications (TASE: LSE: BVC; TASE: BVC), which deals in medical diagnostics and telecommunications and is traded in Tel Aviv and London, announced last Thursday that it will be relegated from FTSE UK Index Series on the London Stock Exchange. The London Stock Exchange decided that companies listed in the indices must be British, and that companies incorporated in other countries and listed on another stock exchange do not qualify as such.
BATM has known of the new regulations for a year, and even reported them, but it sought a review from the London Stock Exchange and received a one-year extension. The year is now up, and the London Stock Exchange has not changed its decision.
Following last Thursday's announcement, BATM's share price fell 11.3%, and the company opens trading in Tel Aviv this morning with a market cap of NIS 1.03 billion. Sources close to the company say that the funds that have to sell BATM shares as soon as it is removed from the FTSE indices hold a little over 3% of the company; that is to say, the fall in BATM's share price is sharper than the direct damage that should be caused by its removal from the indices.
Time to move to Nasdaq?
It may be that the fall in its share price and the blow dealt it by the London Stock Exchange, which wants only British companies in its official indices, will make the company reconsider where it should be traded. The London Stock Exchange seems less welcoming than in the past, and the company's complicated structure (consisting as it does of a bio-medical division and a networking and cyber division that as time goes by is responsible for a diminishing proportion of its business, the opposite of the situation in the past) causes confusion among its traditional investors. It's possible that it would be better for the company if it were to split, and then the logical place for the networking and cyber division would be Nasdaq, while the bio-medical division might be better off in Tel Aviv.
BATM's share price has fallen 47% in the past year. In July 2019, the company was listed on the Tel Aviv Stock Exchange, having been traded there in the past and then delisted in favor of a listing on the London Stock Exchange. Over the four years in which it was absent from the Tel Aviv Stock Exchange, its share price rose 130%, and when it re-listed there the share price continued to climb. Between July 2019 and the peak in July 2020, it rose a further 207%.
The rise was mainly thanks to the way in which BATM took advantage of the coronavirus pandemic. It produced tests and ventilators, mainly for the overseas market, and its revenue grew. In 2020, revenue totaled $183 million, 49% more than in the previous year. In the first half of 2021, revenue growth was 8% (excluding a one-time deal posted in 2020). In other words, it kept the gains made in the wake of the pandemic, but could not repeat the same rate of growth. Net profit in the first half of 2021 was $11.9 million, which compares with $1.9 million in the corresponding period of 2020.
BATM continued to release new products related to the pandemic, which does not look as though it plans to disappear anytime soon, but nevertheless its share price fell 63% from the peak.
At the same time as announcing its removal from the FTSE indices, BATM also announced a share buyback program for up to 10% of its issued shares. The program will be financed from the company's cash, which amounted to $101 million at the end of June 2021.
Commenting on the removal from the FTSE indices, BATM CEO Zvi Marom said, "We are very disappointed by the decision of FTSE Russell not to grant us a further extension and maintain our membership of the FTSE UK Index Series. We are puzzled by this decision as we have been in regular dialogue with them and had certain indications that it would be granted.
"We are not the only company that has been denied this by virtue of our domicile and dual listing. A lack of pragmatism and blindness to the possibility of market disruption is fast becoming a deterrence for good foreign-domiciled companies to list on the London Stock Exchange, especially when other bourses do not have such draconian rules. We hope the lawmakers look at this again and become welcoming to global companies who wish to give investors in index-linked funds in the UK as well as those in their own countries the opportunity to invest in them."
The company stressed that the removal from the indices "does not affect the trading of the stock on either the London Stock Exchange or TASE, including all the indexes in TASE. Investors will continue to be able to trade BATM's shares as previously."
On the Tel Aviv Stock Exchange this morning, BATM's share price is down 5.97%, at NIS 2.19. It closed at 47.3 pence on the London Stock Exchange on Friday.
Published by Globes, Israel business news - en.globes.co.il - on February 6, 2022.
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