A pricing procedure yesterday set the sale of shares in Kornit Digital(Nasdaq:KRNT) by investment fund Fortissimo Capital at $20.60 per share, 7% lower than the closing price in Tuesday's trading. The Kornit share price responded yesterday by plunging 8.1% to $20.35, reflecting a $682 million market cap. Despite yesterday's loss, the share still has a positive 60.8% return since the beginning of the year.
Kornit produces and markets industrial digital printers for printing on cloth and wearable items. Fortissimo is the company's largest shareholder. Fortissimo will sell 4.25 million Kornit shares, meaning that its proceeds will be $87.6 million. The underwriters in the sale, Barclays and Citigroup, have an option to buy more shares from Fortissimo, which could increase the total proceeds to $101 million.
If this option is exercised, Fortissimo, led by CEO Yuval Cohen, will see its Kornit stake fall from 26.3% at present to 11%. As of now, there are no other large shareholders in Kornit or investment institutions that are a party at interest in the company.
Second successful sell-off for Fortissimo
This is Fortissimo's second successful sales of shares in Kornit this year. Last January, just after the share price zoomed in the wake of a cooperation agreement signed by Kornit with Amazon, Fortissimo sold shares for $94 million at $16.50 per share, while CEO Gabi Seligsohn sold shares for $1.5 million. In addition to the offer for sale in January, Kornit issued new shares, raising $38 million.
Fortissimo invested in Kornit in 2011, acquiring control of the company with an investment of only $16 million at a company value of $23 million. Before Kornit's April 2015 Nasdaq IPO, Kornit owned 70% of the company. The IPO was at $10 a share, meaning that the share price has risen 104% since the IPO.
Discount Bank a big beneficiary of the sale
One of the main beneficiaries of Fortissimo's second sale of shares in Kornit is Israel Discount Bank (TASE: DSCT) (managed by CEO Lilach Asher-Topilsky), a major investor in Fortissimo. Assuming that the sale goes through as planned, Discount Bank's revenue from the sale is expected to reach NIS 60 million (depending on the volume of the sale), the amount listed in the first quarter reports, following Fortissimo's previous sales of shares in Kornit.
Sales on the capital market are making an important contribution to Discount Bank's profits this year. The bank's first quarter results, published early this week, show that Discount Capital Markets, the bank's investment arm, posted NIS 75 million in revenue from the sale of investments, headed by Fortissimo and NIS 10 million from the sale of an investment by FIMI Opportunity Funds in Novolog (Pharm-Up 1966) Ltd. (TASE:NVLG).
Assuming that Fortissimo's second sale of shares in Kornit is completed before the end of June, Discount Capital Markets, managed by CEO Hila Himi-Alpert, will post a NIS 60 million profit, plus a NIS 12 million profit on a sale by another fund.
More profit is scheduled to follow in the third quarter, this time from an investment in Ormat Technologies Inc. (NYSE: ORA; TASE: ORMT). Discount Capital Markets is one of the main investors in FIMI, which recent signed an agreement to sell control of Ormat to Japanese investment company ORIX. This sale, which will probably be completed in the third quarter, is expected to generate a pre-tax profit of NIS 50 million for the bank.
Discount Bank is accumulating nearly NIS 200 million in revenue from the sale of investments in 2017, and we are still in the first half of the year. This is a significant amount for the bank, whose profit totaled NIS 905 million in 2016. Profits on investments are a strong support for improvement in the in results reported by the bank in its core business, and are pushing its profit growth forward.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 18, 2017
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