The Public Markets Can be Tough on Israeli IPOs: Major Earnings Reports This Week
Calcalist CTECH wrote recently of the tough time many Israeli IPOs have had as they find that the public markets are not as patient as VC investors and therefore the oft repeated phrase is that there is a "lack of synchronicity between private and public markets" and it's not just Israeli IPOs:
While valuations on the private market have never been higher, and more and more startups are becoming unicorns and even decacorns, the public market isn’t as excited when it comes to young tech companies. This isn't just relevant to Israeli companies but is rather a general sentiment being displayed by Wall Street towards these new public companies, which this year mainly came from the tech sector.
The explanation for the high valuations of private VC funded companies stems from the huge inflow of capital into VC funds. Investors in these funds expect the money to be put to work quickly thus driving up the values of companies during each successive round. VC investors by definition are willing to wait for profitability and don't expect all of their investments to become successful :
VCs like Tiger Global, Insight Partners, and General Atlantic present offer sheets within a few weeks, often with higher valuations. The reason for this is the high sums these funds receive from their investors, who expect their money to go to work. As a result, the funds are quick to invest money in companies that are raising $250 million or even $400 million, even though they have only begun to record revenue.
But once the companies hit the public markets the investor base is far less forgiving and looks at the range of other stock investments across all stocks not just ipos or tech. As initial valuations are based on extremely large rates of revenue growth...any diappointment will be punished by the market. Single digit growth is not enough for investors to hold on.
In fact the only Israeli IPOs that have held their value above the IPO price have been the three so far profiled here: Monday.com, GlobalE and SenitinelOne.
Among the companies mentioned by Ctech whose stock had been punished after earnings reports are:
Playtika which went public in February, reported third-quarter revenue of $635.9 million compared to $613.3 million in the prior-year period. However, analysts were expecting revenue of $664 million. Net income was $80.5 million, a big drop compared to $119.9 million in the prior-year period.
Video creation and distribution company Kaltura also experienced a similar fate this week, with its shares dropping 17% after disappointing projections for the fourth quarter for revenue of $43 million, the same as it registered in the third quarter,
Several recent IPOs are reporting earnings this week and next meeting or exceeding expectations will be needed to support their high valuations A partial list:
GlobaE: Pre market November 10
Walkme: After market November 10
Lemonade After market close November 8
Hipo: After market close November 10
Monday.com After Market November 10
SentinelOne: Pre Market November 10
Payoneer: After Market November 10
Similar Web Pre Market November 10
Taboola After Market November 9