When maritime software developer Windward was listed on the London Stock Exchange (LSE) in December of 2021, it signalled the long-awaited return of Israeli technology companies to London. The listing was one of the world's biggest maritime IPOs, raising over £34.5 million and now trading at 24.2% over its listing price. Windward is the latest, but by no means the only Israeli company, turning to London for growth opportunities and access to capital markets.
It joins several other Israeli companies listed on London's public markets. These include Kape Technologies, a cybersecurity start-up that improves consumers' digital privacy and protection, Plus500, which operates a CFD trading platform, and online gaming operator 888 Holdings.
U.S. capital markets remain the number one listing destination for Israeli companies, having attracted 40% of all Israeli tech IPOs in 2021. However, Nasdaq is not an ideal fit for many growing Israeli tech companies. Instead, London can be more attractive for many reasons.
Accessible for small and medium businesses, especially in tech
You don’t have to be a unicorn to be listed in London. The London Stock Exchange offers several listing options, including the Alternative Investment Market (AIM) which is a specialized unit catered to small and medium-size growth companies. In recent years, the average market capitalization of an AIM company on IPO has been $100 million, compared to nearly $500 million on Nasdaq. This means smaller and mid-sized companies can successfully complete an IPO in London.
London knows tech. In 2021, tech businesses accounted for nearly 40% of total IPO proceeds. It also has a rapidly maturing and wide-ranging tech sector, with unprecedented public market investor support for tech capital raising, and a fast-growing pipeline of tech IPOs. It is now a global destination for tech and digital businesses.
A listing in London does not prevent companies from accessing other capital markets. As they grow in scale and value, many use London as a platform to raise capital, then execute a U.S. listing at a later stage. Recent examples include Israeli ad-tech company Tremor international Ltd., which developed a software platform to streamline trading between advertising buyers and publishers. Tremor was listed on the Nasdaq in mid-2021 at a market cap of around $1.5 billion. Seven years earlier, the company went public in London at a market cap of just $240 million. In the year before its U.S. listing, Tremor's share price on the LSE rose by almost 500%.
Saving money, and headaches
The cost of listing in London, as well as the ongoing cost of operating as a public company, is far lower. Underwriting fees, for example, are typically 3-5% in London, compared to 6-7% in the U.S. London requires half-yearly rather than quarterly reporting, significantly reducing the reporting burden on companies, and allowing more focus on growing the business.
Another benefit is avoiding litigation risks, a notorious downside of listing in the U.S. In the last year alone, 210 federal court securities class action lawsuits were filed, meanwhile, in the UK, just a handful of similar suits have been filed over the entire previous decade.
As sure as scones with jam are a reliable afternoon staple, another tick in London's favour is the UK's stability. As reported by the LSE, U.S. markets typically see greater price volatility, particularly for non-American companies listed on NYSE or Nasdaq. Finally, the UK offers superior price discovery mechanisms throughout the IPO process. This means management teams and their advisors have access to feedback from investors from early on in the process. This enables them to better understand the likely valuation outcome.
London offers Israeli growth companies the opportunity to repeatedly raise long-term capital efficiently from international and domestic institutional investors. An IPO in London means accessing capital from across the world.
London has more listed international companies than any other major exchange. It raised 25% of all the world’s cross-border IPO capital in 2020 and is certainly Europe's largest exchange. In 2021, a record year for IPOs, the London Stock Exchange was the largest centre for listings globally outside the U.S. and Greater China. Over 120 inspiring companies chose to list in London last year, raising £16.8 billion, the strongest year for IPOs since 2007 with the highest number of IPOs since 2014. Ultimately, every company is going to find a listing solution that works best for their business and vision for its future. But as we look to London, with all the benefits it can offer, we could see the city welcoming a growing number of Israeli startups.
Written by Tandeep Minhas, Partner, and Nathan Krapivensky, Senior Counsel, at Taylor Wessing law firm.