The IPO of technology company Vonetize on the Tel Aviv Stock Exchange failed. The Netanya-based company, which was supposed to make its big break in 2016, failed on Thursday to raise NIS 30 million from local financial institutions even after cutting its pre-money valuation from NIS 200 million to NIS 120 million.
Some market sources claim that the IPO failed because one of the financial institutions, allegedly Altshuler Shaham, which was to participate in the IPO and order shares to the tune of several million shekels, changed its mind in the last moment.
Altshuler Shaham responded by stating, "We examined an investment in Vonetize, as from time to time we examine investments in dozens of firms, and eventually decided not to invest. Altshuler Shaham made no commitment to participate in the offering."
Vonetize CEO Noam Josephides said that the IPO failed because "the underwrites failed to deliver, even though the company's owners contributed their own money - half of the orders were ours." The underwriters in this offering were Discount Capital Markets and Rosario Capital.
Vonetize's business is the distribution of video on demand (VoD) content to smartphones and televisions. The company's offering was to be the Tel Aviv Stock Exchange's first IPO for 2016, breaking the local market's long period of inactivity in technology company offerings. Vonetize's failure magnifies that of the local stock exchange management, which has focused on technology company offerings as a cure for the drought in the primary market.
Vonetize was founded in 2011, and raised about $6 million in several private rounds in 2014 and 2015. The last placement, in 2015, was based on a post-money company valuation of $30 million, so that the current placement was to be at the price of the private placement in 2015.
Until recently, Vonetize, like many other Israeli startups, experienced difficulties in raising the funds and building the robust marketing required to develop from a startup to a company with an international presence. The last company statements showed significant losses, with a 'going concern' qualification added by the auditors.
Operational losses increase
The financial statements indicate that Vonetize's revenue in 2015 totaled $2 million, a rise of 19% from 2014, with a gross loss of $60,000, mainly due to increasing expenses following the many distribution agreements it has signed lately. This compares with a gross profit of $400,000 in 2014.
Operational losses rose to $3 million, compared with $1.8 million in 2014 and the net loss was $3.2 million, compared with $2 million last year. The first quarter of 2016 saw the loss rise to $1.1 million and revenue decreasing to only $249,000.
"The fall in the values of many high-tech companies in the past few months, among them Israeli companies traded on US exchanges, means that you can invest in established technology companies at fairly low prices. Financial institutions will almost always prefer investments like those, in companies such as Mellanox or Mobileye or Check Point, for example, to investment in startups," a source in Israel's new issues market said, adding, "Good technology companies will want an offering on Nasdaq, so that the companies that try to make IPOs in Tel Aviv are the less good ones, to say the least, and the institutions therefore avoid investing in them."
Published by Globes [online], Israel business news - www.globes-online.com - on July 11 2016
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