While the star of the Tel Aviv Stock Exchange (TASE) is fading, Haifa Mayor Yona Yahav is taking steps to establish another stock market in Israel. Sources inform "Globes" that the Haifa municipality is about to publish in the coming days a call for entrepreneurs to submit bids for setting up a new stock exchange specializing in technology companies that will compete with the TASE.
"The Haifa municipality believes that founding another Israeli stock market in Haifa, distinct from the existing stock market, is important," the call states. The solicitation is aimed at entities "with significant experience in the capital market and stock market trading" that can propose a business plan for establishing a stock exchange in the city. Under the Securities Law, the Minister of Finance will decide whether to grant a license for managing a stock exchange.
The tender applies to "entities with proven capability and appropriate experience in capital market activity, securities trading, establishing a trading floor, knowledge in setting up the relevant computer systems, experience and knowledge in regulation, and familiarity with the regulatory agencies needed to establish the venture, including the ability to recruit investors."
As far as is known, the selected bidder will bear the expense of building the new stock market, while the Haifa municipality will help in moving the regulatory aspect of the venture forward. In addition, the developer will undertake to grant the Haifa Economic Corporation (a full partner in the process, which is managed by Gal Peled) an option to acquire a certain percentage of ownership in the new stock exchange.
Haifa municipality sources told "Globes" today that the initiative, which Yahav has been trying to promote for two years, stems from the fact that Israel is the only country in the world with a single economic center. They added that the decision to publish the call, and in effect to expedite the initiative to establish a stock exchange in the city, was taken following a survey carried out by the municipality, which aroused interest from a number of potential investors. As part of their bids, the developers will be asked to present a complete business plan for setting up the stock market, including particulars of the option percentages to be granted to the Haifa Economic Corporation. The bidder will also be asked to set a timetable, including a date for submitting the request to the regulatory agencies and the period of time required to complete the venture.
The planned stock market will specialize in technology companies. The Haifa municipality wishes to create a platform for high-tech companies, with an emphasis on those at the seed stage, i.e. companies in their initial development stages that need to raise capital. The decision to specialize in technology companies arises from the fact that a number of leading technology companies operate in Haifa, such as Apple, Google, and Yahoo!, and the presence in Haifa of the Technion Israel Institute of Technology and the startups operating in it.
The Haifa municipality's decision to expedite the process of constructing a new stock exchange comes at a time when the TASE is at one of its lowest points. It is known that the TASE is at a critical stage, with plunging trading volumes and the delisting of public companies.
In addition, the choice of a stock market specializing in technology companies partly overlaps with the strategic plan recently formulated by the TASE. Yossi Beinart was appointed CEO of the TASE early this year for the purpose of engineering a significant change in that organization. In the published business plan for the TASE, Beinart noted that active measures were necessary to attract suitable small and medium-sized companies for listing on the TASE, including the assembling of a new package of offerings tailored to the relevant Israeli companies.
The TASE has already spotted the need of high tech companies to raise money, and has also established rules making it easier for R&D companies to issue their shares to the public. At the beginning of the year, the committee for promoting investment in public companies operating in research and development published its final recommendations.
The committee's conclusions include a series of recommendations designed to promote possible solutions for financing high-tech companies through the TASE by encouraging IPOs of relatively large high-tech companies and encouraging the establishment of marketable venture capital funds to invest in and support a number of high-tech companies and ventures in the early stages. In addition, the committee recommends adopting a number of financing solutions outside the TASE.
"There is no room for two stock markets in Israel; we're too small a country," a senior market source told "Globes" today in response to the emerging initiative. Nevertheless, given the current state of the TASE, the source did not dismiss the venture. "If another stock market is built, it could take the place of the TASE. As of now, the existing stock exchange is not managing to right itself, and it may be necessary to simply replace it by a new stock exchange built from scratch. At the same time, this initiative can get off the ground only if a serious entity with deep pockets decides to take up the challenge."
Published by Globes [online], Israel business news - www.globes-online.com - on August 14, 2014
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