High-tech entrepreneur Eyal Waldman decided he had had enough of Israeli investors when they told him to choose between his titles of chairman and chief executive at the company he co-founded, Mellanox Technologies.
So in August, Waldman delisted the chip designer — Tel Aviv Stock Exchange’s sixth-largest company, with a market value at the time of 6 billion shekels ($1.7 billion) — dealing a heavy blow to an ailing bourse that had already seen its chief executive and chairman resign a month earlier.
Waldman said the attitude of Israeli institutional investors, who had been empowered by changes to the Securities Law, was suffocating.
“Mellanox is not an impulsive company. [Delisting] is something we were thinking of, that we saw build up. This was not our place any more,” he told Reuters.
Since Mellanox delisted, a handful of Tel Aviv’s largest companies have threatened to follow suit unless Israel becomes more business friendly.
The problem is the result of both more regulation and less.
Over the past decade, Israel has relaxed rules on overseas investments. Previously, Israeli pensions had to invest nearly 100 percent at home; now they can invest without limitation abroad. At the same time, over the past year the government has introduced securities regulations that Israeli companies complain make doing business far harder, including more stringent reporting requirements, pushing even more money out of the country.
The new regulations have brought consumers some relief – lower cell-phone bills and banking fees — but many investors and businesses say it is at expense of dwindling profits and depressed share prices.
Officials at some of Israel’s biggest firms have said that, like Mellanox, they are nearing a tipping point.
Potash producer Israel Chemicals (ICL), the most traded company on TASE, is seeking to list overseas. Though it has no intention at present to delist from Tel Aviv, CEO Stefan Borgas said in a conference call: “ICL must act seriously and take into account a situation of an additional worsening in the business climate of the Tel Aviv bourse.”
The same goes for Nice Systems, whose products analyze video and big data.
Such talk has scared off investors. Daily trading volume on TASE averages around 1 billion shekels, 47 percent of the level in 2010. Other markets have had more moderate drops; since 2010 trade in London has fallen to 80 percent, on Nasdaq to 77 percent and Tokyo to 79 percent.
Foreigners now account for only about 15 percent of trade on TASE in 2013, compared with up to 25 percent in 2010.
But the real drain has been the money that Israeli institutions have withdrawn as restrictions on overseas investments were lifted over the past decade.
“We are in the process of increasing our investment out of Israel, and this process … still has, in my opinion, a long way to go,” said Amir Hessel, chief investment officer of Harel Insurance and Finance, Israel’s third-largest insurer.
Harel’s pension, provident and life insurance funds have invested 34 percent of their 102 billion shekels in assets under management and 60 percent of their equities portfolio abroad, up from zero a decade ago.
Bank of Israel data shows pension funds hold 22 percent of their assets abroad, nearly double the level of 2009, while insurance funds hold 27 percent overseas.
As one top executive complained, with the public’s cause taken up by the media, it has become “illegitimate” to be rich these days, adding: “We have to stop with this populist atmosphere.”