"At the beginning of 2017, we're optimistic about the offerings market. We finished 2016, a historically weak year for the market, with 90 IPOs, including the one by Trivago. Last year featured mainly IPOs by technology, life sciences, and financial companies," Nasdaq executive VP global listing services Nelson Griggs told "Globes."
Nasdaq is actually one of the world's largest commercial companies (providing technology and trading services through 26 trading theaters to over 3,700 companies with an aggregate value of over $10 trillion. Nasdaq is in a perpetual battle against the New York Stock Exchange (NYSE) and other stock exchanges around the world (mainly in Europe, and recently also in the Far East) to attract successful companies in the US and worldwide planning IPOs. This includes, of course, Israeli companies (for which the Tel Aviv Stock Exchange (TASE), which is trying to attract local companies to hold offerings in the Israeli stock market, is also competing).
73% of all the issues in the US last year were on Nasdaq, and Griggs is also optimistic about 2017, saying "Even though there were quite a few unexpected events in the world during 2016, such as Brexit and the election of Donald Trump as president, the market is now signaling bullish sentiment and starting to create positive conditions for IPOs. This unquestionably stands to be a very interesting year, in view of the combination of the awakening of the global markets, lower volatility, high liquidity in the market, and a growing appetite from investors. This is projected to lead to a larger number of new offerings to the public."
As of now, 94 Israeli companies with an aggregate market cap of $70 billion are listed on Nasdaq, including 30 biomed companies and 50 companies in various high tech sectors. The Israeli share with the highest return over the past year was Sodastream International Ltd. (Nasdaq: SODA; TASE: SODA), whose share price skyrocketed 223%, giving the company a $990 million market cap. Second on the list was OTI - On Track Innovations Ltd. (Nasdaq: OTIV; DAX: OT5), which jumped 217% to a market cap of $75 million, followed by Mazor Robotics Ltd. (Nasdaq: MZOR; TASE:MZOR) in third place with a 132% gain.
The Israeli company on Nasdaq with the highest market cap is Check Point Software Technologies Ltd. (Nasdaq: CHKP) with a market cap of $17.7 billion, after its share price climbed 24% in 2016. There are also several more valuable Israeli companies listed on the NYSE, such as Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and Israel Chemicals (TASE: ICL: NYSE: ICL).
Successful companies without profits
The number of Israeli companies holding IPOs in the US in general, including on Nasdaq, has fallen steeply in recent years. Actually, the number of Israeli companies listed in the US is the same as it was at the beginning of the century.
Nasdaq managing director Israel and Central and Eastern Europe Asaf Homossany says there is a good chance that this situation will change in 2017. "We're currently in touch with a number of Israeli growth companies in technology, biomed, and cyber with profits and revenue that make them worthy candidates for an IPO on Nasdaq in the US or on one of the Scandinavian stock exchanges (Nasdaq has two subsidiary stock exchanges: Nasdaq OMX Baltic and Nasdaq OMX Nordic, K.Y.). Looking ahead, the backlog of issues we see among Israeli companies includes a number of companies now preparing for an offering, mainly in the medical devices and pharma sectors. We believe that we'll see these IPOs in 2017, subject to the market conditions and macroeconomic events in the US and worldwide."
"Globes": Is there a specific threshold of revenue and profits for a company before it can hold a Nasdaq IPO?
Homossany: "Nasdaq has certain standards, such as market size and revenue, according to which a company can hold an offering and be listed for trading, but there is no obligation to make a profit. In the biomed field, for example, there are many companies in various stages of clinical trials or medical devices that aren't yet making a profit, and are even far from making a profit. They can try to hold an IPO and raise money, and then be listed for trading on Nasdaq."
Does a company with no revenue or profit have a chance of holding a successful IPO in today's market?
"Yes, in my opinion. As I said, there is no obligation to make a profit. As long as there are investors willing to invest in the framework of an IPO, the company can hold an offering. Success of the offering depends on the company: its story, business, management, business model, timing, product, and market. For example, medical cannabis companies, which are now the rage, formerly didn't interest the market. If you look back, you'll see that there are biomed companies that held very successful offerings, following which the share prices fell. On the other hand, companies that held offerings at a relatively low value are now very big and successful."
Biomed successes: Kamada and NeuroDerm
Quite a few Israeli biomed companies are listed on Nasdaq, most of which are still at the proving stage, meaning that they have not achieved profitability, and most of them have not even made substantial revenue. Their operating profit and the value of their shares decline steeply following their IPOs.
On the other hand, there are successful Israeli biomed companies. One of them is Kamada Ltd. (Nasdaq: KMDA); TASE: KMDA), whose share price surged by nearly 100% over the past year. Another is Neuroderm(Nasdaq:NDRM), which raised $45 million at a company value of $164 million in its IPO in November 2014, raised $67 more at a company value of $356 million in July 2015, and raised $86 million in late 2016 in a lightening offering. Despite the offerings and substantial amounts of money raised by this biomed company, which is developing drugs for treatment of Parkinson's Disease, the NeuroDerm share price has gained 175% since the company's IPO, pushing its market cap up to $680 million.
What countries other than Israel are prominent in the number of companies in the pre-IPO processes on Nasdaq for 2017?
"China is very prominent, as are Western European countries."
What sectors are arousing interest among potential investors?
"Mainly various hi-tech sectors, such as cyber and biotech."
Isn't the situation today starting to resemble the bubble in the last 1990s and early 2000 in high tech? Aren't you afraid of a crash?
"Obviously, no one can predict or know what will happen in the coming months, this year, or in 2018. Keep in mind, however, that the macroeconomic environment today is different today than it was in early 2000, and the investors' behavior is also different and more mature. As I said, though, there's no way of predicting or knowing if and when a stock market correction will take place."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 22, 2017
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