ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the March 2000 issue


Exchanges Struggle for 'New' and 'Dual Listings'


The Tel-Aviv Stock Exchange (TASE) as an emerging nation stock market, similar to the smaller European markets, among these Easdaq, launched three years ago, Germany's Neu Market and the French Nouveau Marche appears to be functioning firmly but inevitably in the giant shadow of Nasdaq. The American Nasdaq market whose daily turnovers may exceed two billion shares has made it clear that within the foreseeable future it will set up shop in Europe and provide its services to the European listers. No one doubts that it will be a hard act to beat The unified European stock exchange network scheduled to be up and running by November 2000 has promised to provide a single access to the eight European markets via the same electronic interface. This flurry of activity has prompted Nasdaq to plan its own trading platform Nasdaq-Europe.

Faced with the reality of more than 100 Israeli companies with Nasdaq listing, the European smaller markets are focusung on Israeli technology driven startups for initial public offerings as well as "double listings". They are aiming to get a piece of the trading cake and currently that means wooing Israeli startups .

However, the Europeans say that though only a few dozen high-tech companies have listed themselves on Europe's markets, nevertheless their Exchanges have much to offer new issuers. They quote Israeli technology analysts who say that Europe has lagged behind in attracting Israeli companies, largely because interest there in high-tech stocks took longer to gain momentum than in the United States. They insist that European investors are now ready to absorb high-tech and internet stocks. Unfortunately, it a fact that when European Exchanges hurry to attract listings, they tend to lower the requirements for listing to a level which may prove to be detrimental to shareholders. Companies which are listed prematurely have a subsequent poorer stock market performance than their more patient brethren. While the number of Israeli issues in Europe is increasing, some Israeli companies say Europe still lacks a well-developed community of investors and analysts.

At a recent meeting with top executives of the TASE Managing Director Saul Bronfeld conceded that the Exchange's "dual listing" proposal awaiting approval of the Ministry of Finance may already have missed the boat. Due to the many listings by Israeli companies on Nasdaq the TASE had sought to obtain automatic listing on its exchange of any Israeli company when its NASDAQ listing became effective. This sound idea, which if executed, would provide the benefit of less expensive transactional costs on the TASE and allowed the convenience of trading at hours when NASDAQ had as yet not begun its trading day.

Another consideration is that this could also serve as a tool to enhance peaceful relations with Israel's neighbors when "cross-border" trading with Tel-Aviv will be adopted by Cairo, Amman and Beirut. In checking what the Government is doing, IHTIR learned that the issue of "double listing" is currently in the hands of the Ministry of Finance. The office of the Finance Minister told us that an urgent request has been forwarded to the Ministry of Justice to draft a law for approval by the Knesset, Israel's parliament. Existing restrictions would first have to be removed to pave the way for approval for the simple procedure for "double listing". An optimistic guess would be that such an approval would not become a law before the end of this year. It seems that for the Tel-Aviv Stock Exchange, for all of its willingness and technological ability to handle trading around the clock, it is a case of missed opportunities because it is fair enough to assume that more nimble Israeli high-tech companies will follow the example of Check Point Software Technologies (Nasdaq:CHKP), Mercury Interactive (Nasdaq:MERQ), Orckit Communications (Nasdaq:ORCT) and Galileo Technology (Nasdaq:GALT), will be the first Nasdaq-listed Israeli shares to trade on Easdaq. Delighted Easdaq chief executive Steven Schubert said there are discussion being held to include additional companies from this country. To date, 15 Nasdaq-listed companies trade on Easdaq, all high-profile technology stocks including Microsoft, Cisco Systems and Intel. Two Israeli companies -- Supercom and IT International Theatres -- went public on Easdaq in 1999.However, the Europeans should not take anything for granted, as Nasdaq chairman Frank Zarb along with key executives has visited Israel last month to meet Prime Minister Ehud Barak and economic officials ,who have invited the U.S. exchange to consider cooperation with the Tel Aviv Stock Exchange. As for the Tel-Aviv Stock Exchange --- it has experienced a recent best year in 1999 with equity prices up sharply by 65% in dollar terms. We shall not shed too many tears for the TASE. At the beginning of the millennium there were ten high-tech issues in the initial public offering pipeline awaiting approval for listing. TASE Chairman Prof. Yair Orgeler and Managing Director Saul Bronfeld are hopeful that these will include a few big time future winners such as CheckPoint Software and Comverse Technologies whose combined market capitalization on NASDAQ currently exceeds $15 billion. The shares of these two companies experience daily turnovers on Nasdaq which are greater the total weekly turnover on the TASE or 2.5 times the average one day's turnover of all shares on the local exchange. "With a little bit of luck one of the new issuers will become the star of tomorrow.


Reprinted from the Israel High-Tech & Investment Report March 2000

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