Rather like the London restaurant scene, the
historically conservative UK stock markets have been
developing exotic tastes.
The investor's favourite no longer seems to be the
reliable retailer, the industrial conglomerate or the
Midlands manufacturing company - the appetite
today is increasingly for high tech and biotech
stocks.
Adventurism in the UK markets is also prompting
investors to look further afield. In the last year, a
number of Asian companies found London an easy
place to raise capital. More and more European companies
are also looking to come to market - the driving force
behind a new small-cap European market, Easdaq. And now
Israeli businesses look set to capitalise on the
trend.
Nasdaq, of course, has been a home for Israeli
businesses. But the costs, the stringent reporting
requirements, the distance from Tel Aviv and the
concerns that Wall Street might lose its enthusiasm for
hi-tech stocks are forcing Israeli CEOs to look
elsewhere. For those businesses seeking to raise
capital in the company - London is emerging as the
obvious alternative.
On a recent visit to England and Scotland, Mr. Benny
Gaon, chief executive of Koor Industries, said he had
been "overwhelmed" by the enthusiasm for Israeli stocks.
It is understood that Koor is considering bringing one of
its companies to the London market next year. Investors
might expect Telrad, the telecom subsidiary earmarked for
a float in 1997, to come to market in both New York and
London.
Smaller businesses are also finding a well-tailored
market. Companies like Dmatek, SEA Multimedia and Tescom
have raised money on the Alternative Investment Market -
the UK's equivalent of Nasdaq. In the first year, AIM
attracted 162 companies, worth POUND STERLING 3.6bn,
ranging from football clubs and dentists to internet
service providers and software houses.
There are grounds for caution in dealing with this
fledgling market - at the very least, we have yet to see
it weather a serious downturn. However, its essential
advantages are obvious: a compact, English-speaking
market offers a low-cost route to raising money;
reporting requirements are not nearly as onerous as New
York and, it is four and a half hours from Tel Aviv.
For these reasons, another dozen Israeli companies are
lining up to float - all presumably keen to emulate the
successes of the Aim darlings, such as Freepages, the
telephone information company, which has seen its stock
value almost treble in three months.
The success to date of Aim is part of a broader trend
in London's financial markets. As investors seek more
imaginative ways to find high yielding investments, hi-
tech and international companies have come to the
fore.
Notable examples are Psion, the personal organiser
manufacturer, which has seen its stock rise five-fold in
12 months and Maid, the on-line information
supplier, which quadrupled in value.
One of the most remarkable stories in the City, indeed
in global markets, has been the unstoppable rise of
British Biotech - the company working on a cancer drug
has yet to earn its first dollar in profits, but has
broken the POUND STERLING 1.5bn market capitalisation
barrier.
Last year, Unipalm, an internet service provider that
started up in a Cambridge garage less than a decade ago,
thanks to a POUND STERLING 16,000 loan, saw its
flotation pay off - UUMet, a US rival, bought the
company for POUND STERLING 152m, earning Unipalm's
founder, Mr. Peter Dawe, approximately POUND STERLING
38m.
Another expression of the hunt for value is
consolidation. Barely a week seems to go by without a
multi-billion pound takeover or merger dominating the
news in the UK's utilities sector, pharmaceuticals
industry or financial services sector. Perhaps the most
eloquent expression of the pressure on managers to give
investment shareholders value for money have been the
recent POUND STERLING in share buybacks that give
shareholders a cash-in-hand return on their
investments.
Of course, the London market is not without its
hazards. The crisis in Mexico in late 1994 highlights the
residual conservatism of institutional investors. The UK
will hold national elections within the next year and
with Labour currently 38 points ahead of the ruling
Conservative party, investors might well expect a change
of political environment. And, creeping Euroscepticism
is pushing the UK to the margins in Europe and must throw
doubt over the likelihood of Britain being a founder
member of a European single currency.
Nevertheless, London today is looking as appealing a
destination for Israeli business as it has looked to
Israeli tourists for many years. This series,
"Letters from London", will attempt to examine some of
the trends mentioned above, offer some information
particularly appropriate to Israeli readers and,
we hope, some news you can use.
The writer is a senior partner in Olswang, one of
Britain's legal consultancy firms, which specialises in
promoting private and public flotations on British
financial markets in general and the AIM in particular.
The "Letters from London" series is authored jointly
with City-based financial journalists.