Eleven Israeli companies are listed on the London Stock Exchange (LSE), but senior LSE executives are definitely looking at the large number of Israeli companies listed on Nasdaq - about 100. After the US and Canada, Israel has the next most companies on Nasdaq.
The most recent Israeli company to be listed on the LSE was Visonic (LSE: VSC.L), which raised $18 million (₤9.6 million) in an April issue at a company value of $65 million (₤35 million). Visonic ended a three and a half-year period with no Israeli issues on the LSE.
The LSE is encouraged by the “strong interest” on the part of several Israeli companies in being traded on the London exchange, and by the improvement in Israel’s economic and security situation. The British embassy and the LSE jointly held a “Listing in London” seminar for investors yesterday, with the aim of attracting Israeli companies to the LSE. Leading investment houses Durlacher and Dawnay Day, and British Ambassador to Israel Simon McDonald attended the conference.
LSE Middle East and Western Europe relationship manager Graham Dallas, the liaison person for Israeli companies, says that the advantage of the LSE for Israeli investors lies due mostly in London’s central position in European finance and the global exposure to investors used to investing in international companies. “From an international standpoint, we’re better than Wall Street, because we have far more international companies listed than Wall Street does. 59.5% of the companies listed on the LSE are British, while 40.5% are international companies. In the US, only 13.5% are foreign companies; 86.5% of trading is accounted for by local companies,” Dallas says.
Dallas cites another motive for Israeli companies to be listed on the LSE proximity to investment institutions: insurance companies, banks, and other institutions, which have a significant effect on the market.
On the other hand, one of the problems with trading on the LSE is the requirement that the public hold at least 25% of a company, far greater than the proportion required on the Tel Aviv Stock Exchange and Wall Street. “I don’t think of this requirement as a problem. I regard it as an advantage, and as part of market efficiency,” Dallas says.
”Globes”: Are the stiff requirements made of US companies under the Sarbanes-Oxley Act affecting you?
Dallas: ”I don’t think you can speak of a regulatory arbitrage between the LSE and the US. It’s true that US companies will have to live with the Sarbanes-Oxley requirements, and with the large increase in directors insurance that the act entails, but companies listed on the LSE must also fulfill those requirements. It’s possible that companies interested in being listed in the US will take into account the consequences of Sarbanes-Oxley.”
Do you think that it’s better for companies operating in a particular market to hold issues on the local stock exchange, or to turn to larger markets?
”There aren’t any rules for this; it’s a matter for the companies’ to decide. Companies traded on overseas stock exchanges have traditionally conducted most of their business in other countries. That may be changing; a month ago, an Italian company that conducts all of its business in Italy held an issue in London. In my opinion, they did it because of the more sophisticated market and the platform provided by the London exchange, particularly the Alternative Investment Market (AIM).”
One of the main topics of the conference was trading on the AIM, on which 840 companies are listed. The AIM is an alternative for small companies seeking to raise small sums in a relatively short, inexpensive process. Supervised by the LSE, the AIM is the London equivalent of the technologies shares traded on the small cap market in the US.
The AIM includes mostly companies with a market cap of ₤700,000-10 million, although it also has a few companies with market caps of over ₤1 billion. Dallas says that companies listed on the AIM attract a great deal of attention. After they are listed on this platform for two years, switching to the main London Stock Exchange is much easier and quicker than an IPO.
Published by Globes [online] - www.globes.co.il - on June 24, 2004