The Tel Aviv Stock Exchange marks 2020 with a record in new issues: How exactly does this happen in a global crisis?
The year 2020, which will of course be remembered as the year of the corona, will also be quite surprisingly remembered as a successful year on the Tel Aviv Stock Exchange, among other things in light of the number of new companies issued in the past year. And this complex?
Before we dive into the explanations, let’s make some order in the numbers.
Shalom Zohar, during 2020, about 30 new companies were issued on the Tel Aviv Stock Exchange, a record since 2007, with a significant presence of companies from fields such as renewable energy and technology, along with traditional industries such as retail and industry. Shekel, and in a large part of the issues the investors have achieved a profit and even a significant one.
Tomer, what are the main factors that led to the flood of issues, in a year as complex as 2020?
Although 2020 was a year of global crisis, in the stock exchanges it was mainly a year characterized by acute volatility. The leading US indices, which dipped close to 30% from their peak in February to a low in mid-March, climbed back and even set new highs during the year.
The positive momentum created led to a lot of free money finding its way to attractive investment channels, including the trend of new issues in Tel Aviv, when a significant number of those issues were also successful. Very new companies to the Tel Aviv Stock Exchange in the past year. It is important to say that the significant increase in the number of issues also stems from regulatory changes led by the stock exchange in recent years in order to attract companies to issue in Israel, such as the abolition of the quarterly reporting obligation for small corporations or the possibility of reporting in English.
And finally, on the face of it, this story sounds positive for the stock market, and also for companies and investors. What, after all, is the risk involved in investing in new companies?
The answer to this is complex, and perhaps it’s time to display the warning signs. First of all, it is worth remembering that some of the companies that issued in Tel Aviv this year are beginning companies, whose potential can be realized, or not. Conduct with caution and examine in depth each investment while understanding the risks inherent in it.