Israel has always been the subject of global media attention, and 2021 is proving to be no different. The world is hoping the results of the mass vaccination program against the COVID-19 pandemic are successful.
As early vaccination results are living up to expectations, it’s widely expected that Israel’s economic rebound will be swift and impressive. New investors who wouldn’t otherwise consider Israel as a source of innovation are likely to pay closer attention to what Israeli innovation has to offer — and these people won’t be disappointed.
Israeli stocks have a history of rewarding investors
Catherine Wood earned the status as one of Wall Street’s top stock pickers in 2020. As the founder and CEO of ARK Investment Management, she knows to turn to Israel to uncover hidden gems.
Wood rightfully sees Israel for what it is: home to some of the world’s brightest minds creating corporate giants out of their apartments and garages.
The Ark Israel Innovative Technology ETF that Wood manages is up more than 75% since its launch in late 2017. Over the same time period, the Dow Jones Industrial Average index is up just 28%.
While mainstream stocks to watch like AAPL continue to dominate news headlines, the hottest IPOs in 2021 could come from Israel.
2020 was a great year for Israeli tech
Up against the COVID-19 pandemic that grounded Israel’s economy to a near halt for much of 2020, the country’s high tech industry still managed to grow and earn a spotlight in the global investment arena.
In total, 19 tech companies with connections to Israel went public — the most notable of which was Lemonade. The next-generation insurance provider was founded by Israeli entrepreneurs Shai Wininger and Daniel Schreiber. Shares of Lemonade more than doubled on its first day of trading and closed out the year higher by more than 300%.
Some of the other notable stats compiled by IVC Research Center for 2020 include:
- Privately held tech companies raised $9.93 billion (up 27% year-over-year) in 578 transactions.
- Late-stage companies rose $8.33 billion in funding (up from $6.51 billion).
- Early-stage companies rose $1.6 billion in funding (up from $1.3 billion).
- 121 companies across all sectors raised $6.55 billion (up from $1.95 billion) through initial public offerings, follow-on offerings, and other market transactions.
Economic recovery in 2021
The case for greater global demand for domestic stocks is based in part on Israel’s economic growth prospects. According to Israel’s Finance Ministry, economic growth for 2021 is modeled at 4.6% under a base case scenario. By contrast, Canada’s economy is expected to grow by less than 4% on average in 2021 while Japan’s growth is expected at around 4%.
Even under a less likely scenario that assumes continued deterioration of the Israeli economy, GDP growth will still come in at 1.9%.
Largest Israeli IPOs ever in 2021?
Israel is home to more than two dozen privately-owned tech companies valued at $1 billion or more. Known in the investment sphere as “unicorns,” these companies are closely followed by investors waiting for an opportunity for their shares to be available to the public.
Mark Hager, founder of Regah Ventures, who has been listed by PitchBook as one of the top unicorn investors at the seed stage says, “Looking at the Israeli landscape, even throughout the pandemic, it is clear that Israel is on a trajectory to graduate from Startup Nation into something where unicorns, IPOs, and large sustainable businesses flourish. Given the SPAC vehicle, we are seeing more and more Israeli companies going public.”
According to IVC Research Center, the pipeline for tech IPOs is “strong” across multiple verticals. Israeli tech companies are particularly well-positioned to ride the SPAC wave, where the path to becoming a public entity is quicker, cheaper, more efficient — and loved by investors.
Taboola was among the first to opt for the SPAC route in 2021. The content discovery company reached a deal in which ION Acquisition Corp 2 will acquire Taboola at a $2.6 billion valuation.
Among the more notable Israeli private companies heavily rumored to list directly on the Nasdaq or NYSE exchanges in 2021 is IronSource. Valued between $7 billion to $8 billion, the Tel Aviv-based advertising company helps display ads within mobile phone gains.
Sisense, a business intelligence platform used by global enterprises including NASDAQ themselves, saw a $1 billion valuation at the beginning of 2020, when the company closed a $100 million Series F round. Today, the company, which was founded in Israel but has been headquartered in New York for several years now, is attracting considerable buzz around its rumored upcoming IPO. Earlier this winter, Sisense unveiled a relaunched brand and a new AI-powered analytics solution called Sisense Fusion, and Gartner named the product a “visionary” in its latest Magic Quadrant report, adding to the intensity of the spotlight.
Project management software company Monday.com, also rumored to become public in 2021, will likely rank as one of the top-five Israeli IPOs in history given its estimated value of $3.5 billion to $4 billion.
SimilarWeb, an analytics platform that lets users see how much traffic their website or mobile app generates, rounds off the list of potential IPOs to watch out for. The Tel Aviv-based company could be valued at $2 billion in its public launch.
To date, Mobileye holds the title of largest IPO in Israeli history at $5.3 billion in 2014. The developer of advanced driver-assistance systems was ultimately acquired by Intel in 2017 for $15.3 billion.
Mobileye’s elite IPO status risks being pushed down to the third spot in 2021 as cryptocurrency and stock trading platform eToro is eyeing an IPO at a $5 billion valuation. There is a real possibility for eToro’s valuation to increase over the coming months after its main rival Robinhood infuriated customers during the GameStop short-covering fiasco.
The country that keeps on giving
If 2021 proves to be the best year ever for Israeli IPOs, the business and investment community will certainly look to break that record in 2022, and again every year after. The roster of very small-startups valued in the millions of dollars making a name for themselves today is only set to grow.
The most recent example of an Israeli company dominating media headlines worldwide is Redefine Meat, a plant-based food maker that uses 3D technology to print faux-steaks. If the company’s 2021 expansion is successful, it has a path to fulfill its goals of “becoming the world’s biggest alternative meat company by 2030.”
The list of Israeli companies poised to join the elite “unicorn” club over the many years ahead is certainly too numerous to name. Many of them haven’t even been created yet.