The sharp declines on Wall Street in the past year have hit many Israeli technology and biomed companies traded there hard. While the Nasdaq index has fallen 33% since last November, some of these companies have lost 90% or more. The result is that more than twenty Israeli companies are now traded in New York at less than $1 per share, and are in danger of being delisted. A similar number of companies are traded at between $1 and $2, and if they weaken could find themselves in similar danger, "Globes" finds.
Both on Nasdaq and on the New York Stock Exchange, a company’s share price must be over $1 over a period of time in order for the company to meet the conditions for being listed on the exchange. A company with a share price below $1 for an extended period receives a warning letter from the exchange’s management before delisting is carried out.
The process is not immediate, however. Companies receive a grace period of six months during which they are required to comply once more with the minimum price requirement, and in many cases the period can be extended by a further six months. In fact, such companies can remedy the situation by the fairly easy technical means of a reverse stock split, in which several shares previously traded at less than $1 are consolidated into a single share priced at more than $1.
This is what digital insurance company Hippo Holdings (NYSE: HIPO) did recently. The company, which went public through a merger with a SPAC in the summer of 2021, lost about 90% of its value within a year, and its stock was traded at around $0.80, when it received a warning from the New York Stock Exchange management. With the approval of its shareholders, Hippo united every 25 shares into one share, and its share price is currently considerably higher than $1 (it closed at $15.97 yesterday), putting it out of danger of being delisted.
As mentioned, this is a technical fix. The trend in Hippo’s share price is still downward, and its current share price is equivalent to $0.64 before the reverse stock split. Hippo’s market cap is just $366 million, which compares with $5 billion in the SPAC deal.
There are other Israel companies traded in New York that have received warnings about their failure to meet the minimum share price requirement. Among them are biomed companies Vascular Biogenics (Nasdaq: VBLT) and RedHill Biopharma (Nasdaq: RDHL) (which received a warning letter this week), and autotech company Otonomo Technologies (Nasdaq: OTMO), which need to meet the threshold conditions again by February 2023.
Weakness in autotech companies merged into SPACs
From mid-2020 to the first quarter of 2021, SPAC (special purpose acquisition company) mergers were all the rage on Wall Street. Inactive companies raised money from the public with the aim of acquiring an existing business within a certain period. Hundreds of SPACs raised money, and hunted privately-held companies seeking to go public and raise capital without going through the process of an IPO.
The hype resulted in many companies coming to the market that were not sufficiently mature to go public, or such as received a highly inflated valuation. The result was that investor taste changed, and the number of SPAC deals has declined substantially.
Among the Israel companies that went public via SPAC mergers, two autotech companies, Otonomo and REE Automotive (Nasdaq: REE), present especially weak returns. Otonomo, currently traded at a market cap of just $38 million, has lost 97% of its merger valuation, and REE, with a current market cap of $152 million, has lost 95%.
These companies are traded at values well below the amounts of cash they hold. At the end of the second quarter, Otonomo had $170 million cash, and REE had $207 million. The stock prices of both companies are under $1. REE has not yet received a warning letter from the Nasdaq management, but unless its share price rises from $0.63 to over $1 soon, it can expect to receive one within the next few weeks.
Another company that has not received a warning letter but is liable to receive one in the near future is Talkspace (Nasdaq: TALK). The company, which provides virtual psychological therapy, was founded by Israelis Oren and Roni Frank, and merged with a SPAC in June 2021 at a valuation of $1.4 billion.
After a steep fall in the company’s share price shortly after the merger, the two founders were removed from their posts. Talkspace’s share price recently dipped below $1, and is currently at $0.83, giving the company a market cap of $132 million (which compares with $167 million cash held at the end of the second quarter). "Globes" recently reported that a longstanding shareholder in Talkspace, Firstime Ventures, had expressed concern at the company’s share price and at the prospect of it receiving a delisting warning.
Among other technology companies traded at under $1 are Foresight Autonomous Holdings (Nasdaq: FRSX), Actelis Networks (Nasdaq: ASNS) (which went public this year), and SuperCom (Nasdaq: SPCB). A fairly large number of life sciences companies are traded at under $1, among them G Medical Innovations Holdings (Nasdaq: GMVD), Evogene (Nasdaq: EVGN), and Can-Fite BioPharma (NYSE American: CANF).
Pagaya’s rise and fall
As mentioned, there are also several Israel companies traded at over $1 but under $2. Among these are cybersecurity company Cyren (Nasdaq: CYRN), SaverOne 2014 (Nasdaq: SVRE), which was floated this year, content recommendation company Taboola.com (Nasdaq: TBLA), merged into a SPAC last year, video solutions company Kaltura (Nasdaq: KLTR), floated last year, and two veteran technology companies: Ceragon Networks (Nasdaq: CRNT), and Senstar Technologies (Nasdaq: SNT) (formerly Magal).
Another instance of a stock traded at under $2 is that of fintech company Pagaya Technologies (Nasdaq: PGY), which, with a share price of $1.38, has a market cap of $939 million. At the end of last week, Pagaya’s share price reached an all-time low of $1.34, just two-and-a-half months after the stock was at nearly $30, giving Pagaya a market cap of over $20 billion. Since that peak, Pagaya’s has lost 95% of its value, and it is now traded at 89% below its valuation for the purposes of its merger into a SPAC.
That merger was completed in June last year. After the share price fell in the first few weeks of trading, the trend suddenly changed, without explanation, and within just two weeks, up to the beginning of August, the company’s market cap shot up tenfold. The assessment was that this was an extreme case of a short squeeze.
The rise in the share price led to Pagaya exceeding the threshold set in the IPO documents, and the lockup period during which the company’s founders and investors were prevented from selling shares was shortened. They can now sell some of their holdings, but these shares, which at the peak were worth billions of dollars, are now worth a great deal less.
Published by Globes, Israel business news - en.globes.co.il - on October 19, 2022.
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