Every few years a different stock exchange around the world becomes a focal point for attracting early stage Israeli tech companies. Over the years it has been London's Alternative Investment Market (AIM) and in recent years the Australian Securities Exchange (ASX), while others, like the Toronto Stock Exchange, have tried their luck. And most recently, even the Tel Aviv Stock Exchange is getting in on the act.
Now the Frankfurt Stock Exchange is looking for a piece of the action and its management is hoping that we will soon see Israeli tech offerings in Germany. At a virtual presentation made over the past few days, Israeli companies were informed about options for offerings on the relatively new Scale segment of the Frankfurt Stock Exchange, where reduced regulatory requirements make a listing more suitable for smaller growth companies, compared with the main listing.
The conference was held by the Frankfurt Stock Exchange owner Deutsche Borse in cooperation with Israel's Pearl Cohen law firm, Fahn Kanne Grant Thornton Israel, and public offering consultant Ruth Palmon. There was a major interest among the company's taking part in the conference, Palmon said, although at this stage no procedures are underway for an offering in Frankfurt.
Frankfurt Stock Exchange VP pre-IPO and capital markets Nathalie Richert presented to the conference the advantages of listing in Germany. Among other things, she stressed that the investor base is broad and there is access to financing for continued growth. The presentation shown at the conference stressed options for finding international investors and gave examples of a number of tech companies in which the investors come from a range of countries (Germany, the US, UK, Luxembourg, Sweden and more).
According to the presentation, the Frankfurt Stock Exchange is, "Number one for IPOs by small and medium sized enterprises," and as proof statistics were provided that might be somewhat surprising: The percentage of technology companies on the Frankfurt Stock Exchange is 18% compared with 11% on Nasdaq, and just 8% on the London Stock Exchange.
About 34% of the technology companies traded in Frankfurt have a market cap of at least $100 million, which is usually the value of relatively early stage companies that are not yet looking at a Wall Street IPO. The presentation also stated that the average returns on technology shares that held an offering in recent years in Frankfurt is 82%, and the returns are even higher for companies that held their offering in 2012 and have since yielded returns of 587%.
Among the participants at the conference were also figures that until now have been 'identified' with offerings in Australia and have led no small number of companies there. Take for example Palmon, and Adv. Anna Moshe, a Senior Partner at Pearl Cohen, who said that, "The capital market is currently very hot and is already eagerly anticipating interesting new companies. The German stock exchange is delighted that interest among German investors has been aroused in Israeli companies and is waiting for the first technology company to list for trading."
Why now and why Frankfurt?
Palmon: It's a stock exchange that's super-worthwhile and there as in the rest of the world, they understand that the future is in innovation. Consequently, three years ago they opened a new segment, the Scale listing, which allows earlier stage companies to list for trading on easier terms and with the marketing support of the stock exchange. The idea is the allow companies at an earlier stageto gain a foothold in the stock exchange."
Other stock exchanges also offer secondary listings of this type
"That's correct. Also in London, Singapore, and Canada this exists. Today, companies postpone their IPO because they don't always want to cope with all the regulation involved. A listing like this allows exposure to institutional investors, and to institutions and allows exposure to the world of growth, which until today mainly 'played' the venture capital funds."
The Australian Securities Exchange is actually proud that there is no secondary listing designed for early stage companies, and all companies are traded on the same list.
"The advantage in Australia is that the regulation is lighter, certainly when compared with Israel, and every company has exposure to all the investors including the institutions. But still if you look at the shareholders in the in the small companies compared with the big companies, you see that the institutions are mainly found in the big companies."
According to Palmon, a company needs to hold its offering in the region in which it operates, so the Australian Securities Exchange and the Frankfurt Stock Exchange cannot replace each other but rather complement each other. "A company that sells in Australia and Asia-Pacific is more suited to holding its IPO in Australia. A company that is oriented to German speaking countries is more suited to the Frankfurt Stock Exchange," says Palmon.
Adv. Anna Moshe adds that, "Israeli companies that are interested in listing should know and understand who is the broker who is supporting them and if they can support them in the long term and who are the other players in the market. We are talking about a sophisticated market that is used to technology companies, and therefore maintaining the share has to be genuine, because it is difficult to gain the trust of the investing public in new inventions that lack real flesh."
She continues, "The support stage after the IPO is critical because if the public loses confidence in a share, the company will find it difficult to raise more capital. Therefore, these questions must be asked before the IPO in order to plan for the long term."
Published by Globes, Israel business news - en.globes.co.il - on November 4, 2020
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