Click here to close now.

SYS-CON MEDIA Authors: Carmen Gonzalez, Liz McMillan, Jon McNeill, Elizabeth White, Pat Romanski

News Feed Item

Israel's Economic Progress Threatened by Tactical and Structural -- and Solvable -- Liquidity Shortages, According to New Milken Institute Report

LOS ANGELES, CA -- (Marketwired) -- 03/18/14 -- In 2010, Israel graduated to developed country status in world stock indexes, a move that should have opened its markets to a large pool of global investors. Instead, there has been a decrease in foreign portfolio investment and an increase in local portfolio outflows. Israel's capital markets have suffered a decline in liquidity that threatens the country's economic security and growth. From 2008 to 2012, the average daily trading volume on the Tel-Aviv Stock Exchange (TASE) has dropped more than 50 percent, from NIS 2 billion to around NIS 800 million. TASE liquidity ranks a low 30th among exchange turnover ratios in international securities exchanges. This is according to a new report from the Milken Institute, "(Re)inventing Israel's Capital Markets: Financing the Transition from Startup Nation to Global Nation."

Also according to the report, the Israeli IPO market has collapsed, mostly due to high regulatory costs in the NASDAQ and TASE, leading to 95 percent of startups being sold to foreign entities. These conditions, a result of the failure to attract and retain portfolio investors from outside Israel and overconcentration on early-stage financing, put at risk the future of local capital investment and overall economic growth. The lack of late-stage financing, along with human capital constraints, is leading startups to premature exits through mergers and acquisitions. Knowledge-based firms and their exports, the heart of Israel's competitive advantage, require a longer financial runway for takeoff in transitioning into global companies.

"Without liquidity, Israel will not be able to transition from a startup to a scale-up nation or become a leader in new technologies whose global contributions also reap domestic rewards," observed Milken Institute Senior Fellow Glenn Yago. "While known for their R&D, Israel's startups have not been as successful commercializing the products and discoveries that would build more businesses, new sectors and secondary markets, and gain for Israel a greater share of the product value chain."

"(Re)inventing Israel's Capital Markets" comprises the discussions in a Financial Innovations Lab® -- a gathering of senior leaders in Israel's public and private sectors along with representatives of financial institutions and regulators -- convened by the Milken Institute in Los Angeles in May 2013. Participants explored ways to improve access to capital with an eye toward securing Israel's future as an innovation hub.

Lab participants came up with concrete solutions that Israel can enact now to reverse its liquidity crisis:

  • Increase transparency and accessibility to foreign investors, in part by creating new financial products, such as exchange traded funds and global benchmarks.
  • Remove regulatory, institutional, legal, tax, and market infrastructure requirements that impede the establishment of a financial services landscape supportive of new technologies, and modernize regulations for IPOs to lower transaction costs of public offerings.
  • Develop fixed-income products that support economic expansion in Israel's regions and new technologies.
  • Expand private equity through public markets with venture trusts and business development corporations for under-financed firms; and, especially, create late-stage technology venture funds.
  • Build a "technology bridge" to institutional investors for pre-IPO companies by bringing them into an institutional investor asset class, such as a non-exchange-traded, private-shares market.
  • Rebrand and re-launch the Tel-Aviv Stock Exchange as the Global Technology Securities Exchange through new financial products for global partnerships that solve challenges through technology applications in the emerging and frontier markets.

"The technology bridge we discussed in the Lab would give the most promising companies access to a global community of asset managers and to additional capital, beyond the traditional venture capital and private equity markets," Yago added. "These young companies would benefit from a longer runway before launching an IPO or being forced into an early merger or acquisition -- a move that most often ushers IP out of the country that funded its development."

The Lab concluded that the time has come to "reinvent" Israel's capital markets. Israel needs to put the mechanisms in place to finance the expansion of its high-tech companies and disruptive technologies so that they can become self-sustaining. Their success in commercializing technologies and products for export will strengthen economic security -- and will enable Israel to serve as a model for other countries seeking to emulate its rise as the first startup nation.

"To build a global nation, it is not enough to incubate startups. Companies must be able to 'scale up' as well," said Yago. "Without solving its capital gap, Israel's technological mojo will emigrate, undermining the base that could sustain a highly productive, high-employment society."

About the Milken Institute
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges. Its mission is to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital and enhance health.

About Financial Innovations Labs®
Financial Innovations Labs® bring together researchers, policy makers, and business, financial, and professional practitioners to create market-based solutions to business and public policy challenges. Using real and simulated case studies, participants consider and design alternative capital structures and then apply appropriate financial technologies to them.

www.milkeninstitute.org
@milkeninstitute

Add to Digg Bookmark with del.icio.us Add to Newsvine

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Dale Kim is the Director of Industry Solutions at MapR. His background includes a variety of technical and management roles at information technology companies. While his experience includes work with relational databases, much of his career pertains to non-relational data in the areas of search, content management, and NoSQL, and includes senior roles in technical marketing, sales engineering, and support engineering. Dale holds an MBA from Santa Clara University, and a BA in Computer Science f...
Wearable devices have come of age. The primary applications of wearables so far have been "the Quantified Self" or the tracking of one's fitness and health status. We propose the evolution of wearables into social and emotional communication devices. Our BE(tm) sensor uses light to visualize the skin conductance response. Our sensors are very inexpensive and can be massively distributed to audiences or groups of any size, in order to gauge reactions to performances, video, or any kind of present...
Even as cloud and managed services grow increasingly central to business strategy and performance, challenges remain. The biggest sticking point for companies seeking to capitalize on the cloud is data security. Keeping data safe is an issue in any computing environment, and it has been a focus since the earliest days of the cloud revolution. Understandably so: a lot can go wrong when you allow valuable information to live outside the firewall. Recent revelations about government snooping, along...
FedRAMP is mandatory for government cloud deployments and businesses need to comply in order to provide services for federal engagements. In his session at 16th Cloud Expo, Abel Sussman, Director for Coalfire Public Sector practice, will review the Federal Risk and Authorization Management Program (FedRAMP) process and provide advice on overcoming common compliance obstacles.
The cloud is now a fact of life but generating recurring revenues that are driven by solutions and services on a consumption model have been hard to implement, until now. In their session at 16th Cloud Expo, Ermanno Bonifazi, CEO & Founder of Solgenia, and Ian Khan, Global Strategic Positioning & Brand Manager at Solgenia, will discuss how a top European telco has leveraged the innovative recurring revenue generating capability of the consumption cloud to enable a unique cloud monetization mod...
Red Hat has launched the Red Hat Cloud Innovation Practice, a new global team of experts that will assist companies with more quickly on-ramping to the cloud. They will do this by providing solutions and services such as validated designs with reference architectures and agile methodology consulting, training, and support. The Red Hat Cloud Innovation Practice is born out of the integration of technology and engineering expertise gained through the company’s 2014 acquisitions of leading Ceph s...
Are your applications getting in the way of your business strategy? It’s time to rethink your IT approach. In his session at 16th Cloud Expo, Madhukar Kumar, Vice President, Product Management at Liaison Technologies, will discuss a new data-centric approach to IT that allows your data, not applications, to inform business strategy. By moving away from an application-centric IT model where data integration and analysis are subservient to the constraints of applications, your organization will b...
As organizations shift toward IT-as-a-service models, the need for managing and protecting data residing across physical, virtual, and now cloud environments grows with it. CommVault can ensure protection &E-Discovery of your data – whether in a private cloud, a Service Provider delivered public cloud, or a hybrid cloud environment – across the heterogeneous enterprise. In his session at 16th Cloud Expo, Randy De Meno, Chief Technologist - Windows Products and Microsoft Partnerships, will disc...
Cloud data governance was previously an avoided function when cloud deployments were relatively small. With the rapid adoption in public cloud – both rogue and sanctioned, it’s not uncommon to find regulated data dumped into public cloud and unprotected. This is why enterprises and cloud providers alike need to embrace a cloud data governance function and map policies, processes and technology controls accordingly. In her session at 15th Cloud Expo, Evelyn de Souza, Data Privacy and Compliance...
Analytics is the foundation of smart data and now, with the ability to run Hadoop directly on smart storage systems like Cloudian HyperStore, enterprises will gain huge business advantages in terms of scalability, efficiency and cost savings as they move closer to realizing the potential of the Internet of Things. In his session at 16th Cloud Expo, Paul Turner, technology evangelist and CMO at Cloudian, Inc., will discuss the revolutionary notion that the storage world is transitioning from me...
The Software Defined Data Center (SDDC), which enables organizations to seamlessly run in a hybrid cloud model (public + private cloud), is here to stay. IDC estimates that the software-defined networking market will be valued at $3.7 billion by 2016. Security is a key component and benefit of the SDDC, and offers an opportunity to build security 'from the ground up' and weave it into the environment from day one. In his session at 16th Cloud Expo, Reuven Harrison, CTO and Co-Founder of Tufin,...
The essence of cloud computing is that all consumable IT resources are delivered as services. In his session at 15th Cloud Expo, Yung Chou, Technology Evangelist at Microsoft, will demonstrate the concepts and implementations of two important cloud computing deliveries: Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). He will discuss from business and technical viewpoints what exactly they are, why we care, how they are different and in what ways, and the strategies for IT ...
Cloud data governance was previously an avoided function when cloud deployments were relatively small. With the rapid adoption in public cloud – both rogue and sanctioned, it’s not uncommon to find regulated data dumped into public cloud and unprotected. This is why enterprises and cloud providers alike need to embrace a cloud data governance function and map policies, processes and technology controls accordingly. In her session at 15th Cloud Expo, Evelyn de Souza, Data Privacy and Compliance...
Roberto Medrano, Executive Vice President at SOA Software, had reached 30,000 page views on his home page - http://RobertoMedrano.SYS-CON.com/ - on the SYS-CON family of online magazines, which includes Cloud Computing Journal, Internet of Things Journal, Big Data Journal, and SOA World Magazine. He is a recognized executive in the information technology fields of SOA, internet security, governance, and compliance. He has extensive experience with both start-ups and large companies, having been ...
There are many considerations when moving applications from on-premise to cloud. It is critical to understand the benefits and also challenges of this migration. A successful migration will result in lower Total Cost of Ownership, yet offer the same or higher level of robustness. In his session at 15th Cloud Expo, Michael Meiner, an Engineering Director at Oracle, Corporation, will analyze a range of cloud offerings (IaaS, PaaS, SaaS) and discuss the benefits/challenges of migrating to each of...