NASDAQ headquarters in New York – Israel is now the most important international market on the exchange. Chip by chip, drug by drug, in their offices, labs and studies, Israelis are building empires that they are swiftly bringing to foreign …
Among the 70 Israeli names on NASDAQ (an acronym for the National Association of Securities Dealers Automatic Quotation System), are some of the country’s biggest success stories: ECI Telecom, Scitex Corp., Amdocs, and Comverse Technologies.
“Israel is now the most important international market on the exchange,” Charlotte Crosswell, the Head of NASDAQ International, told ISRAEL21c.
“There are strong links between the US and Israel that have been built over the years. For many Israeli issuers a NASDAQ primary listing is preferred. The principal attraction of the US is its size in investment terms – $15 trillion in equity assets, representing nearly half the world’s total,” explained Crosswell.
However, she continues, raising capital is not the only reason Israelis choose to list in the US. Many Israeli companies have built significant US client bases with which they are seeking to forge long-term alliances.
NASDAQ helps buyers and sellers make trades of stock, which are executed through a sophisticated computer and telecommunications network. This network connects 11,000 traders in 790 firms in 1,000 locations.
Through this system Israeli companies trade alongside giants like Sun Microsystems, Microsoft, and Ebay. Two Israeli companies have earned their ranks in the prestigious NASDAQ-100, added Croswell, namely Teva Pharmaceutical Industries (TEVA) and Check Point Software Technologies (CHKP). The NASDAQ 100 trust Exchange Traded Fund, is the most actively traded security in the world.
Operating since the early seventies, the NASDAQ has been hosting Israeli companies from 1980 when Scitex Corporation first went public. There had been other companies trading in the US on other exchanges but they were generally in non-hightech areas and were lightly traded, Joel Bailey, an American-Israeli investment analyst based in Israel, told ISRAEL21c.
Bailey, editor of Israel’s leading hightech and venture capital publication, the IVCJ, and author of several guide books such as Going Public in the US, contends the disproportionate amount of Israel’s fiscal success in foreign markets can be due to two major factors: Israel’s highest per capita of PhD?s in the world, and its enthusiastic entrepreneurial spirit.
“Between the years of 1992 and 1994 thirty Israeli companies went public in the US,” says Bailey attributing the success of these companies back then to Israel?s expertise in the military area.
“Israel’s strong military research arm fuelled technology that could be could be easily transferred for civilian use in the private industry for communications and software/security at the time,” he added.
NASDAQ which some years earlier defined itself as a venue that catered to the new world of hightech companies, had synchronized its timing well to match what would develop. Israel was one country that had the ability to quickly jump on board.
Now Israel’s future couldn’t look rosier. Bailey lauds Check Point, a security software company, as a reliable investment choice. It was the first company to let shoppers and business people make secure transactions over the Internet and now dominates the Firewall technology market at over 60 percent.
“They are the gold standard of Internet security,” notes Bailey. “It has done well since it went public in 1996 when they raised 68 million US dollars. When the market crashed and the hightech bubble burst in 2000 the company crashed with it but it has indeed made a very good comeback.”
“Check Point, along with Comverse and others have helped Israel develop a sterling reputation in the hightech field.”
Israel’s super success has been Comverse Technology (CMVT) a company which builds software for call centers and security. It went public in 1993 and raised 53 million US dollars at that time. Today its market capital is 3.77 billion US dollars.
Looking ahead to the future, Bailey speculates that Pharmos (PARS), a company developing drugs for traumatic brain injury (TBI) and strokes will have a bright future should its Phase III clinical trials for trauma show positive results. Pharmos’s synthetic cannabinoids used in its TBI and stroke research are much the same compounds found in the cannabis plant. Its goal is US Food and Drug Administration (FDA) marketing approval.
“There are no FDA approved drugs for treating traumatic brain injury at this time. Should Pharmos be the first company to get the FDA green light in this area, it will firmly establish itself as the leader in this potential $1 billion annual market,” said Bailey.
The Pharmos team began by producing an eye infection drug, which it sold to Bausch & Laumb. By 2001 Pharmos began focusing almost exclusively on central nervous system and neuro-inflammatory research and development.
“If, however, current clinical trials fail to confirm earlier success in treating TBI, Pharmos’s stock is likely to fall precipitously,” warned Bailey.
Currently trading around $2.50 per share, if Pharmos gets the highly esteemed approval, it will be targeted by bigger drug companies Bailey believes.
“We expect to get results of our Phase III clinical trial by the end of this year or by beginning of January 2005,” says Irit Kopelov, company spokesperson. “Only then can we decide when and how to file with FDA.”
If an investment can’t wait until January, Bailey suggests, M-Systems. The company makes Flash storage systems for mobile handsets, military and aerospace. Flash memory is durable, operates at low voltages, and retains data when power is off.
“It is an outstanding company,” says Bailey, “But the price of the stock has been restrained because of price competition in its field. Revenues, however, are moving up fast, and it is only a matter of time until M-Systems finds itself consistently profitable.”
More recently, Ness Technologies completed its initial public offering on NASDAQ earlier this summer, selling 11.7 million shares at $12 each. Its market cap now exceeds $400 million. Ness is a provider of IT services, operating in 14 countries and employing 4,500.
There are likely to be several other Israeli companies to go public on NASDAQ in the next half-year deduces Bailey.
“I suggest keeping an eye out for the IPOs of Saifun Semiconductors, a fabless supplier of non-volatile memory solutions, and Shopping.com,” he says.
Shopping.com filed to go public in the first quarter of this year, and last week raised its IPO price, giving it an average company value of $473 million. If the issue goes as expected, it will be the sixth Nasdaq IPO by an Israeli company this year.
For those that are looking to do more thorough research, Bailey recommends Standard and Poor’s Directory of Public Companies Israel, brokerage firms that cover Israeli companies such as Goldman Sachs, and Merrill Lynch, and resources developed in Israel such as the Marker, Globes and BioIsrael.com.
But whatever research you do, you’ll likely find similar answers. An investment in Israeli companies is a sound one.