Delisting is in, while public offerings are out. There was a time when London's AIM (Alternative Investments Market) was called by some the Alternative Israeli Market.
Those proud days when almost every other Israeli company wanted an IPO on London's AIM are long gone. From software and real estate companies to gaming and betting firms, AIM made an IPO cheaper and easier, while London was just a four to five hour flight away.
In a short space of time dozens of companies went public on the AIM and at one time some 50 Israeli companies were being traded there. But over time the disadvantages of the AIM began to outweigh the advantages. Many investors began to realize that a substantial number of the companies had held a public offering prematurely. Consequently those shares slumped and resulted in the companies being delisted.
One after the other, as if infected by a disease, Israeli companies began delisting from the AIM. An investigation into the latest situation by "Globes" shows that only 30 Israeli companies, out of 50 at the peak, remain listed on the AIM.
Some of the companies that have delisted were simply unsuccessful. They raised money while still recording losses rather than generating revenue and simply burned up most of the capital that they raised.
"Globes" found that the 20 companies that delisted from the AIM raised $1.5 billion and most of this sum was frittered away without creating a single dollar in positive cash flow. $1.5 billion invested in developing mines (Nikanor), failed acquisitions (Bateman Litwin), and developing "breakthrough" technologies (AdMind, Orcka, Axis Mobile and many more).
$1.5 billion was the amount of money which came out of the pockets of a relatively naïve public - that bought all the promises it was given and it all went up in flames when the public understood that the promises and deeds were false.
The companies that delisted have been quick to blame the AIM for their problems. Many claim that the AIM platform did not provide an adequate alternative trading platform with high costs that damaged their balance sheet. They also insisted that the dubious reputation of the AIM hurt the price of their share.
These companies can go on blaming the AIM until the cows come home but the reality is different. Those companies that delisted can only blame themselves. They failed to create value for their investors, made incorrect decisions that led to a decline in their value and sold the public castles in the air.
Even so we should not be quick to write off the AIM and future IPOs there. There are few suitable platforms overseas for small and medium-sized companies. And an IPO is still the preferred exit for a private company.
Among those whose companies have been delisted from the AIM. Benni Steinitz raised $619 million. Zohar Levy raised $393 million. Yitzhak Tshuva raised $220 million. Eli Reifman raised $122 million.
Published by Globes [online], Israel business news - www.globes-online.com - on November 8, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009