Four dual-listed healthcare companies recently announced their delisting from the Tel Aviv Stock Exchange (TASE) at a time when, in contrast to the recent drought, the Israeli stock exchange appears to be recovering slightly. Is this the beginning of a trend that will be followed soon by other healthcare companies, to the TASE leadership's regret?
A sample survey we conducted indicates that the answer is no, there are no such plans. The remaining healthcare companies dual-listed in Israel and the US say they are loyal to the TASE and Israeli investors, although this chorus should be taken with a grain of salt.
But OrbiMed Advisors LLC senior managing partner Nissim Darvish, which invested in two companies listed on both the TASE and Nasdaq, is saying openly what others have only whispered: "I think that healthcare companies listed on the TASE and Nasdaq should consider abandoning the local stock exchange, if they can afford to do so. In general, TASE investors are less familiar with the sector. A larger proportion of TASE investors in healthcare are day traders. They increase volatility and lower market caps, especially in difficult periods.
"I'd like to see a company like Medigus Ltd. (TASE:MDGS) ( a company in which Orbimed previously invested and then sold its holdings, and which now barely has any parties at interest, G.W.) go back to being a private company. A company like BioLineRX Ltd. (Nasdaq: BLRX); TASE:BLRX) (in which Orbimed also invested and sold out, G.W.) should settle for being listed in the US. As a rule, we now price a company we want to invest in at a discount if it's listed on the TASE."
What will keep healthcare on the TASE?
Questions like these have been asked in the local market for years. Last week, however, they led to a decision for the first time. Two healthcare companies announced their upcoming delisting: Cellect, which has already been delisted) and BiondVax Pharmaceuticals Ltd. (Nasdaq: BVXV; (TASE:BVXV), which has not yet announced when it plans to be delisted. Another company, CollPlant Holdings Ltd. (TASE: CLPT), today announced its upcoming delisting. Two other healthcare companies were delisted from the TASE several weeks ago under completely different circumstances.
Cellect and BiondVax are Israeli healthcare companies that had themselves delisted from the TASE because, as Darvish described, they felt that TASE trading was undervaluing them, and the regulatory requirements in Israel were too stringent. Other dual-listed companies delisted from the TASE in recent years include Mellanox Technologies Ltd. (Nasdaq:MLNX), Silicom Ltd. (Nasdaq:SILC), and Ituran Location and Control Ltd. (Nasdaq:ITRN), but those were technology companies traded at large market caps for longer periods on Nasdaq.
Cellect CEO Dr. Shai Yarkoni previously told "Globes," "Since we were dual-listed on Nasdaq, we've seen that every positive thing that happens to the share there is offset by trading in Tel Aviv. Every time the share went up on Nasdaq, the Israeli market pushed it back down. We looked into the matter for several months, and concluded that we had become an opportunity for short players and day traders taking advantage of the arbitrage. We believe that ending trading in Tel Aviv will free us of them. In addition, we think that Nasdaq is now able to give a more accurate value to young healthcare companies than the TASE."
Two other healthcare companies recently delisted from the TASE are a completely different story. MannKind Corporation (Nasdaq: MNKD) and Celsion were listed on the TASE in last 2015, taking advantage of a loophole in the regulations that enabled them to enter the local indices and utilize the measure to generate demand for their shares (Mannkind also made an offering on the TASE).
These two companies, however, whether or not by chance, fell apart shortly after being listed on the TASE, and are now fleeing from it, after having been removed from the indices. These companies have no connection with Israel, and when they were traded here, they took little notice of Israeli investors. All they can get now from the TASE is additional costs, negative media coverage, and an army of angry investors, including those who did not invest in the company directly, but felt their effect on the indices.
The main question on the agenda now is therefore not why companies are being delisted from the TASE, but what will keep them here. Compugen Ltd. (Nasdaq: CGEN; TASE: CGEN) CFO and COO Ari Krashin, which has been listed on Nasdaq since 2000 and dual-listed on the TASE several years later, says, "We're not considering being delisted from the TASE. Being traded here requires investments of money and time, but not to an extent that burdens us, because that's part of our routine, and we don't feel that the investment comes at the expense of our US investor. We aren't in Israel just because of patriotism; it's because we derive benefit from the extra trading. On a rainy day on overseas markets, it's good to have a home, and the price really isn't too expensive.
"In the US, investors usually specialize in what they invest in, and there's no doubt that on the average, an Israel healthcare investor knows less about the field than his US counterpart who invests in the same company. It's true that dealing with double regulation is difficult, and that trading here is light and sometimes appears not to justify the effort, but I believe that things will change. Investors will get more professional, and become more familiar with the sector."
Ofer Haviv, president and CEO of Evogene Ltd. (Nasdaq: EVGN; TASE:EVGN), an agricultural biotechnology company, which was listed on the TASE in 2007 and on Nasdaq in 2013, says that his company sees great value in being dual-listed in Tel Aviv and the US. "We have a close connection with Israeli investors, a large proportion of whom have been with the company for many year.
"We prefer a broad and diverse base of investors, and it's worth keeping in mind that Israel has a history, tradition, and great innovation in the global agricultural industry (Israel Chemicals (TASE: ICL: NYSE: ICL), Adama Agricultural Solutions Ltd. (TASE: ADAMA), Netafim Ltd., Hazera Genetics Ltd. (TASE: HQS)), and others). "
Investors wandering in the wake of companies
Oramed Pharmaceuticals Inc. (Nasdaq: ORMP); TASE:ORMP) , a company that develops diabetes drugs, is a counter example. It has been listed on Nasdaq for over a decade, and completed its dual-listing on the TASE a month ago. COO and VP business development Josh Hexter says, "We really see nothing negative about being listed in Tel Aviv. We're in Israel in any case, so it's easier for us to stay in touch with the community here. The stock exchange reporting is the same, and we don't think that there's any negative impact on the price."
The fact that Cellect and BiondVax are now listed only in the US and have abandoned the local market is misleading, because these companies took some of their investors with them in their switch to the US. Furthermore, these companies are classed as microcap shares on Nasdaq, and are small even for this category. It will take time before Cellect and BiondVax attract the interest of professional healthcare investors, for whom the Israeli companies are usually dual-listed.
While there is no way of knowing home many of the investors in these companies are Israelis, it is likely that the proportion is significant, and the companies will be unable to forego the interface with both Israeli investment institutions and Israeli day traders.
Published by Globes [online], Israel Business News - www.globes-online.com - on September 10, 2017
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