In an interview with “Globes”, he stresses the importance of visiting Australia every three months. According to him, today’s sophisticated market requires Israeli companies to have a good reason to list on ASX. When investors ask why raising money in Australia, they need a better answer than the value they get is higher than on any other stock exchange.
Shiri Haviv Valdhorn 27/12/2018,
One of the most prominent trends of recent years in the capital market was the influx of Israeli companies to trade on ASX, the Australian stock exchange – 20 Israeli companies are traded there, with a total value of about 1.2 billion Australian dollars (about 3.2 billion Shekels). But if you look at the data in depth, you find that of all the companies, three large companies account for more than half of the cumulative market value, and more than that: ten companies are trading today at a share price lower than their Australian offering price. This data is presented by Ronn Bechler, Managing Director of the Australian investor relations company Market Eye. In an interview with “Globes”, he said, “Unfortunately, there was a number of small Israeli companies listed for trading on ASX. They took the money and did not come back very often to meet investors in Australia. This makes it difficult for the good Israeli companies that were interested in IPOing on ASX over the past year.”
In other words, the small Israeli companies have a bad reputation in Australia?
“Some of those issued did not help, but that does not mean that they are not good companies – it may take time for them to ‘shine’, and it’s important that the companies that are issued perform well from the start, and in any case you’ll invest a lot of time and money in the process. It seems that the appetite of Australian investors for small Israeli companies still exists – according to Bechler, he is expected to meet 15 companies in Israel, and investors in Australia asked him to update whether there are interesting companies. In general, the companies that made initial IPOs in Australia in the past year, not only among Israelis, did not yield exceptional returns to investors. According to Bechler, “The market was good until two months ago, and then it became more difficult, because of the global macro environment, the value of technology shares in the US declining, and investors becoming more nervous.”
In contrast, Australia’s economy is in very good shape. “The government has recently announced an early transition to a surplus budget, unemployment is at an all-time low, low interest rates, and while every country has political problems, Australia is considered a low-risk country.”
The global macro environment also affects the IPO market?
“In recent months, several issuances have been postponed to 2019. In any case, it is important to remember that the issuance process takes about nine months, it’s not a quick process.”
It is also not cheap.
“It’s true, we need lawyers and accountants, and the cost is about 250,000 Australian dollars, and the broker who accompanies the issue usually receives between 6-8 percent of the money raised, the higher the amount raised, the lesspercentage the broker takes.”
Does this process benefit small Israeli companies at all?
“It’s good if the company needs money to fund growth, and the right kind of investors can support the company in more than one round of financing, and the fact that a public company needs to be transparent because there are customers who want to make sure the balance sheet is strong enough. Therefore an IPO can be a good deal. “Sometimes, a pre-IPO can help (a round of fund raising in Australia before a public offering). The company raises a smaller sum, and after two years or so you can make an IPO, and it will be easier for it as it needs to grow.”
Usually, the larger Israeli companies are looking at a Nasdaq IPO.
“Nasdaq is great, but a company has to be relevant, and in order to be relevant and for the funds there to look at it, it should be worth a billion dollars. In Australia, a company could also be relevant at a value of A$100 million (NIS 270 million). A company can raise funds on ASX, grow and then list on Nasdaq when it reaches an interesting size.”
The Tel Aviv Stock Exchange is irrelevant?
“I think it has a role: There are very few Australian companies that are traded on foreign stock exchanges and not in Australia, and I do not see a reason why Israeli companies will not trade on the Tel Aviv Stock Exchange.”
What is the advantage of the Australian Stock Exchange over other exchanges in the world?
“Australia is the fourth largest pension market in the world, with a compulsory pension system and billions of dollars flowing into the system every year, one of the largest exchanges in the world with large volumes of trade and a large investor community, and regulation is stable.”
Looking for more Israeli companies
Market Eye, which is headed by an ex investor relations manager for ASX public companies, advises five Israeli companies. “I want to bring good Israeli companies to Australia and help them grow into even bigger companies. There are investors who want to invest in good companies, and if I find another company or two on this visit, it will be a success for me,” he says.
Bechler notes that Market Eye people are familiar with investors from different countries and different types. “We know the requirements of each and match the companies to the investors according to the value, the sector, the liquidity, whether it is a company of value or growth, etc. It’s a little like being a matchmaker … The company’s management is important because that’s how they communicate with those that they need to.”
What are the sectors that are of interest to Australian investors today?
“Retail investors have been used to investing in mining and energy stocks, where they invest on the basis of what is known today, but the end result is not known, like technology companies in the early stages. And of course, companies with good cash flow are always prominent in a volatile environment.”
Very small Israeli companies that issued two years ago will no longer be accepted as easily by investors.
“Part of the historical problem was that there are several law firms in Israel that work with many small technology companies, and they told them that it is possible to find investors in Australia and pushed the companies that way. Australian brokers said, ‘Yes, it’s possible, let’s list.’ Then what? Today, the market is more sophisticated, Israeli companies need a good reason to list on ASX beyond simply raising money: growth in Asia, a large potential Australian customer, R&D in Australia. Investors want to know that the company is coming to Australia for more than just finding a source of capital.”
What are your recommendations for Israeli companies that want to issue in Australia?
“First, as stated, there needs to be a reason to raise money in Australia. The first question that investors ask is why ASX, and an answer like ‘a higher value than another fund raising’ is not good and can create a backlash. Second, the company’s management has to come to Australia every three months to meet with investors. You also need a good board of directors that includes people familiar to the Australian capital market – it attracts money. I’m looking at the recently listed Shekel Scales that is an excellent company, has a great technology, a good board of directors and reliable management, but the stock fell 30%… I suspect the wrong investors entered and sold shares… nothing has changed with the business. The last recommendation is to find the best advisers” he said.