The violent fluctuations in the price of robotics company Eshed Robotec's shares is a prime illustration of the prevailing mood on capital market. Eshed being an industrial company manufacturing industrial robots, its share staunchly kept to the solid level of NIS 2, occasionally surging to NIS 3.5.
After long and peaceful months, Eshed's share, traded on the Tel Aviv Stock Exchange (TASE) and NASDAQ, started soaring. Having gone up by thousands of percentage points, it reached a record NIS 73 in March.
This unprecedented advance was attributed to various reasons, notably to the company's technology operations: a negligible $75,000 investment in an Internet venture for video files swapping, SwapStation.com, and the establishment of a sub-subsidiary, MemCall, which develops technology for accelerating data mining speed.
Eshed's managers and owners were quick to react. When the party was at its climax they sought to translate the advances into cash, announcing they would hold a financing round on NASDAQ. Eshed further said it would reorganize into divisions, including a start-up incubator made up - surprise, surprise - of the two ventures.
The storm that gripped Wall Street pushed Eshed's share down 72% in less than a month to a NIS 21 low in early April. The share has slightly recovered since, taking its cue from the market, but Eshed quickly realized that the brief period of grace was over.
Today the company announced its decision to call off the planned issue, in view of changes in the US capital market.
At the same time, Eshed said MemCall, in which it has a 70% holding, had raised $2 million from a private investor in a share swap, reflecting a company value of $40 million, after money for MemCall. Such a company value implies that Eshed's holding is worth $28 million.
Under the deal, the investor also bought 100,000 Eshed Robotec shares for $575,000, 40% lower than the share price on Wall Street this morning. The private investor was also given an option to convert the MemCall shares into Eshed Robotec shares by the end of 2001.
Published by Israel's Business Arena on 10 April, 2000