Tel Aviv II?
The debate rages over whether there should be a second stock
exchange in Israel.
NEIL COHEN AND GAUT LIPKIS SPECIAL TO THE JEWISH NEWS
W
hen the idea of a second from $2 million and tightened the
stock exchange in Israel requirements concerning previ-
was floated late last ous trading records as well as the
year, it was greeted information a company seeking
with considerable skepticism. to list its shares must provide in
Few expected that a tender would its offering prospectus.
soon be published and five groups
This stiffening of requirements
would submit bids.
appears to be a response to the
The idea of the second bourse criticism aimed at "bubble" com-
has its roots in the expansion of panies — firms with no business
the Tel Aviv Stock Exchange and few assets — which have
(TASE) and the lengthening line been able to list their shares and
of companies seeking to list their raise significant amounts of mon-
shares on it.
ey.
shareholders' equity or track
record requirements.
Cable TV, cellular telephone
and biotechnology companies
need to raise huge amounts of
capital to develop their products
or operating infrastructure be-
fore they see a penny in revenue,
let alone profits. There seems to
be little sense in denying them
access to public equity markets.
NASDAQ, which was
launched to compete with the
New York Stock Exchange, has
Action at the Tel Aviv Stock Exchange.
As the market boomed over
the last five years, it became ob-
vious to businessmen and fi-
nanciers that the TASE was an
easy source of cheap money. But
as investors became less and less
discriminating over the quality
of companies in which they in-
vested, the TASE began to im-
pose ever-tighter regulations
governing who could list their
shares on the exchange.
The main bone of contention,
which is the subject of ongoing lit-
igation, is the minimum amount
of shareholders' equity required
before a company can apply for a
listing.
Most recently, the TASE
raised the threshold to $3 million
These companies pose, many
believe, an inordinate danger to
investors.
But critics, led by MK Sylvan
Shalom, the chairman of the
Knesset Finance Committee's
capital markets subcommittee,
argue that the tighter listing re-
quirements prevent many
promising smaller companies
from raising capital.
High-technology companies
with considerable promise (and
commensurate risk) have been
forced by the regulations to raise
money on the NASDAQ in the
United States, where, although
listing is more expensive and the
regulations in some ways are
more demanding, there are no
succeeded to such an extent that
multi-billion dollar companies
like Apple Computer, Microsoft
and biotech giant Amgen de-
clined to list on the Big Board
when blessed with success.
NASDAQ, though, is not the
only model of a second or small-
er companies' stock exchange.
The Unlisted Securities Mar-
ket (USM) in London, set up to
solve problems similar to those a
second bourse in Israel would be
designed to alleviate, ground to
a virtual halt and ultimately
ceased operating as trading all
but dried up in many smaller is-
sues, leading to huge bid-ask
spreads and leaving investors un-
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