2022 will come to a close in just a few weeks, but it can already be said with almost complete certainty that most of the Israeli technology companies traded on Wall Street will end it with negative returns on their stocks. Investors’ preferences on the capital market changed towards the end of 2021, as interest rate hikes loomed, and they abandoned technology companies in favor of safer stocks. Since then, the macro-economic climate has only worsened, as interest rates have risen in an attempt to combat inflation, fears mount of recession in major economies, supply chain difficulties have still not been completely untangled, and the war in Ukraine continues.
Shareholders in Israeli technology companies are of course not the ones to have lost money (on paper) this year. The Nasdaq index has fallen by 27% in 2022 to date, the S&P 500 is down 15%, and the Dow Jones index is down 6%.
Several Israeli stocks on Wall Street have fallen by more than the indices, some having lost more than half their values this year. Some major shareholders in these companies have paper losses in the hundreds of millions of dollars. The following are the outstanding examples (figures correct to the end of November).
Monday.com: Down 76% from peak
Monday.com (Nasdaq: MNDY), a developer of work processes management software, was floated on Nasdaq in June 2021, a peak period for Wall Street IPOs. Its valuation in the IPO was $6.8 billion, and by November 2021 it had climbed to a market cap of over $19 billion, making it one of the most valuable Israeli companies traded in New York. Since then, however, sentiment has changed, and the market cap is down 76% from the peak and 65% for the year to date, at $4.7 billion.
Monday.com co-founder Roy Mann held Monday.com shares worth $1.8 billion at the end of last year. His stake is now worth $631 million, representing a loss on paper of almost $1.2 billion. His partner in founding and running the company, Eran Zinman, is down $456 million on his holding, which is currently worth $244 million.
In its third quarter financials, Monday.com reported 65% revenue growth to $140 million, narrowed its GAAP-based net loss, and even switched to a net profit on a non-GAAP basis. The analysts covering the company expect revenue to total $510 million for 2022, representing growth of 65% (in line with the company’s guidance) and a non-GAAP net loss per share of $1.6. The consensus analysts’ estimate for 2023 is that revenue will grow by 30% and that the net loss will narrow by 6%.
Global-e: Beats on revenue, misses on profit
Global-e Online (GLBE) has developed a platform for removing barriers to cross-border e-commerce. The company was floated on Nasdaq in May 2021 at a valuation of $3.6 billion. After its share price took off, it made a further offering in which insiders sold shares, among them the three founders, who each sold shares to the tune of $34-35 million.
Since the flotation, Global-e has continued to expand, and has acquired two companies: US company Flow Commerce, and Borderfree, which has Israeli roots.
The three Global-e founders have lost an aggregate $733 million on paper as the company’s share price has declined this year. CEO Amir Schlachet and COO Shahar Tamari have each lost $241 million, while company president Nir Debbi has lost slightly more, around $250 million.
In its recently released third quarter financials, Global-e presented revenue higher than the analysts’ estimate, but the profit figure was lower. The company recently laid off 40 employees, 5% of its workforce, and Schlachet told "Globes" at the time, "We’re doing what a responsible management does in this context. We doubled the company’s workforce to 800, some of it organic growth, and some a result of acquisitions. We have greatly expanded the development, sales, support and finance activity.
"Now, we have reached the point in time at which we have to pause and make adjustments. But although we see storm clouds over the global economy and the consumer markets, and the future looks uncertain, our situation as a company is strong."
Global-e’s updated 2022 guidance projects revenue of $408 million, representing growth of 66% over 2021, and adjusted EBITDA of $45 million, representing growth of 34%.
SentinelOne: Momentarily more valuable than Check Point
Cybersecurity company SentinelOne (NYSE: S), headed by co-founder Tomer Weingarten, also made its Wall Street debut in mid-2021, at a valuation of $9 billion. The share price climbed quickly, and at the peak the company was worth $18 billion, even overtaking veteran rival Check Point. Since the peak reached in November 2021, however, the share price has fallen 81%, to give a current market cap of $4.1 billion. Weingarten holds 9% of the company, a stake currently worth $187 million, down $465 million from the $652 that it was worth at the start of 2022.
SentinelOne is due to release its third quarter financials next week. In the six months to the end of July, SentinelOne’s revenue grew by 117% to $181 million, but its loss also grew, to $113 million on a non-GAAP basis. According to the guidance released with the second quarter financials, the company expects to record revenue of $415-417 million this year and negative operating profitability of 55-58%. Its stock price fell last week as a competitor published weak results.
Fiverr: Among the first to streamline
Fiverr (NYSE: FVRR), developer of a freelancer platform, was floated in 2019 at a valuation of $650 million. At the height of the Covid-19 pandemic, the company enjoyed a following wind as people switched to the Internet in every area of life, thanks to the fact that its solutions are so suited to remote working. At the beginning of 2021, its share price was at a peak, but then, after a cut to the company’s guidance and the general change in the market, its stock switched to a decline, and Fiverr currently has a market cap of $1.3 billion.
In the past few weeks, however, Fiverr’s share price has risen, after it released better than expected third quarter financials.
According to the company’s latest filings, Fiverr co-founder and CEO Micha Kaufman holds 6.4% of the shares, currently worth $84 million. At the beginning of 2022 his stake was worth $271 million.
In July this year, Fiverr laid off 60 employees, half of them in Israel (about 8% of its workforce). At the Globes Israel Business Conference a month ago, Kaufman said, "We were one of the first companies to make adjustments. Fiverr is in a phenomenal position - we were floated in New York three years ago, and today we’re three times bigger and we have become a profitable company. But the situation in the macro-economy is problematic, and when it rains, everyone gets wet." Despite this, Fiver expects to report 12-14% revenue growth for this year to $334-340 million, and adjusted EBITDA of $22-23 million, similar to the 2021 figure.
Wix: Hit by exit from Covid
Wix.com (Nasdaq: WIX), which at the height of the pandemic was traded at a market cap of nearly $20 billion, now has to make do with a much more modest $5.2 billion. Still, Wix has fallen by less this year than the other companies in this list, with a negative return of 43%, as activist investment fund Starboard Value built a stake.
Wix’s solutions enable small and medium-size companies to create and maintain websites. The accelerated move to the Internet during the lockdowns around the world boosted the company’s revenue and its share price, but the exit from the crisis and the return to routine as vaccinations tuned the tide, led to a decline. After a fall of about 80% from the peak, it was reported that Starboard had bought 9% of Wix’s shares, and the fund gave to understand that it considered that Wix had room for efficiencies through a reduction in its headcount.
Even before Starboard came on the scene, Wix announced a streamlining plan aimed at saving $150 million a year, and dismissed 100 employees, most of them outside Israel. In the third quarter, after implementation of the plan, Wix surprised the market with a switch to a non-GAAP profit. According to its guidance, Wix will end 2022 with revenue growth of 9% (affected by exchange rate differences), and will post a non-GAAP operating profit for the fourth quarter, for the first time since 2019.
Wix CEO and co-founder Avishai Abrahami, holds 3.3% of the company, a stake worth $175 million, down from $305 million at the beginning of the year. Wix president Nir Zohar holds shares currently worth $67.6 million, on which he has made a paper loss of some $50 million so far this year.
Published by Globes, Israel business news - en.globes.co.il - on December 4, 2022.
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