The Israel Securities Authority, chaired by Prof. Shmuel Hauser, is promoting the idea of forcing foreign companies like Google and Apple with a market cap of over $100 billion doing business in Israel, to list their shares on the Tel Aviv Stock Exchange (TASE), even if they have no wish to do so.
The Securities Authority published a legislative proposal concerning "involuntary listing for trading of shares of foreign companies listed on overseas stock exchanges" for the purpose of obtaining comments from the public. The Securities Authority proposed that trading in shares under the proposed mechanism not require the foreign company's consent or involvement. Trading will be open to all investors, both individual and institutional, who will hold the shares directly. Because listing will be involuntary, no disclosure will be required from the foreign companies about their activity, and no regular reporting of the affairs will be necessary. In other words, such listing involves a complete regulatory waiver in the local market. Earlier this year, the TASE proposed allowing involuntary and compulsory listing on the TASE of Israeli companies listed exclusively on overseas stock exchanges, with an emphasis on high-tech companies.
The Securities Authority states, however, "There are a number of difficulties with the TASE's proposal," and is therefore proposing a completely different plan, in which the involuntary model will be adopted initially for major international companies, and only for those incorporated outside of Israel "with no Israeli ownership link." According to the Securities Authority, only foreign companies with a market cap of at least $100 billion list for at least a year on advanced stock exchanges recognized for dual listing purposes on the TASE will be involuntarily listed.
The Securities Authority also proposed that shares listed on the TASE involuntarily be delisted if trading in the shares on the overseas exchange is halted, or if their market cap drops below $90 billion. The Securities Authority regards this as a cautious measure, because such large companies have a much better chance of gaining "adequate analysis coverage and are more likely to comply with appropriate regulations, so that trading in them is safer, and the risks are reduced."
Involuntary listing is designed to increase the supply of securities traded on the TASE, and to provide a solution for the lack of interest in the TASE, which has experienced a persistent and alarming fall in the number of public companies. This process, however, is far from problem free. First of all, the legal framework does not guarantee those investing in these shares through the TASE the same status reserved for companies listed on it voluntarily, because these companies are not subject to the law, law enforcement, or regulation in Israel.
In addition, there are "significant doubts concerning the ability of investors in Israel to sue the foreign company for damages caused to them," according to the Securities Authority. Another concern concerning the introduction of involuntary listing in Israel is that it renders the dual listing arrangement unnecessary, which is liable to harm investors and the financial strength of the local capital market, and have a further negative impact on the regular domestic issues market.
Published by Globes [online], Israel business news - www.globes-online.com - on July 15, 2015
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