$26 billion in 4 IPOs, all in one week of work for Israeli tech
Four Israeli companies launched on Nasdaq and NYSE over the past week as the market seems to refuse to cool down
And while four new Israeli companies began trading on the Nasdaq this week, the real story lies within the magnitude of the funds raised and the valuations that the companies receive. Those historic figures for the Israeli ecosystem, leave private fundraisers in the dust and remind the market that despite all the superlatives unicorns and the venture capital funds that nurture them received, the really big money is still in the public market.
Investors are looking for more risksSoftware company ironSource, which for now, holds the title of the largest Israeli offering, raised $2.15 billion through a merger deal with a SPAC company at a record value of $11 billion. This past Thursday it was joined by cyber company SentinelOne, which raised $1.2 billion at a value of $9 billion, the largest cyber IPO in the history of Wall Street. When compared to the two cyber companies, Payoneer’s IPO which raised $1 billion at a value of $3.3 billion, and Taboola’s IPO, which raised half a billion dollars at a $2.6 billion valuation, suddenly seem like much smaller deals. This exceptional week was motivated by the general hot air and the big money flowing in the financial system, as well as by the calendar. Many want to finish their IPOs before the end of the second quarter so they can avoid updating their prospectuses, and enjoy their July 4th holiday. The daily record-breaking highs of the U.S. stock market, which barely budged two weeks ago when Fed Chairman Jerome Powell signaled an interest rate hike, of course, fuels this IPO fever. Since the beginning of the year, several other unusual deals were made for Israeli companies, including software company monday.com, which raised $570 million at a value of $6.8 billion and is already trading at $10 billion. Global-E, SimilarWeb, WalkMe, Innoviz, Talkspace, and Playtika raised a total sum of $9.2 billion, and are all valued at more than $1 billion each, whether through a regular IPO or SPAC merger. Israeli companies, along with many others, flock to the arms of investors, who, for their part, are clamping for more and more risks. Do all these companies have a stable business model? Will they be able to turn a profit? Does their technology work and is it unique enough? No one really wants to delve into these questions, when the market is booming. It seems that retirees from the U.S. and from around the world will be the ones dealing with those questions, once they receive their investment portfolio reports years from now. But in the meantime, everyone wants to live this moment and not think about what will be. How big can the bubble get The first half of 2021 ends with a record $350 billion in capital raising for initial public offerings. There were 17 first public offerings completed just this past week, the third such week this year, numbers not seen since 2000. The second quarter will likely continue to break historical records from that blessed-cursed year.
Unlike in 2000, not every new company spikes during its first trading days, and won’t necessarily rise after that either, which shows that investors still maintain a certain kind of selectiviness and understand that recent offerings can stretch a company’s value to its maximum. Insurtech start-up Oscar Health dropped 40% since its IPO and the London-based delivery company Deliveroo also lost 26% on its first day of trading. This is proof that discretion has not yet completely drowned in the sea of risk.Unlike the year 2000, most companies come with a business model, with a much higher revenue level than previously issued companies, although the vast majority are deficient on the profit side. The big exception is the SPACs, those hollow companies that are looking for a viable candidate to merge with. While there is some SPAC fatigue among institutional investors, more than 400 SPAC companies are looking for a match, holding $128 billion. This money has to go into companies or it returns to the investors plus interest if not used within two years of raising. This makes SPACs less picky and could turn companies public before they are ready, neither in terms of performance nor in terms of conduct. The prevailing estimate is that the IPO market will continue to boil in the third quarter, based on existing prospectuses, SPACs deals, and on the first lesson Wall Street professionals are taught on their first day - IPO windows are always only open for a short period of time. The fear that interest rates might rise earlier than expected only increases the sense of urgency. Different prices for Israeli and American companies Israel has another respectable representative that will reach Nasdaq during this third quarter, fintech company eToro. It is expected to begin trading following the completion of a SPAC merger deal that will put its worth at $10 billion. Other SPAC deals close to fruition include REE, Cellebrite, otonomo, Arbe, and Innovid. Dozens of other SPACs representatives are on the hunt for Israeli companies, or as one American banker described them this week, "very horny money," looking for technology companies that can be taken to New York.