Risks at Tel Aviv Stock Exchange (TASE)

Quasi special situation - at an interesting point

A friend of my family bought a seat on the Australian Stock Exchange (ASX) in the late 1980’s. When the ASX demutualised in 1999, he made a small fortune. Thinking himself savvy, he sold the shares not long after. If he had held the stake until today it would be worth well north of $25M.

Demutualisations, spin-offs, government asset sales, and (sometimes) direct listings can be a fruitful place to go fishing in public markets. So has been the idea being bandied around with TASE.

The elevator pitch is seemingly compelling. TASE represents a key piece of financial infrastructure in a a capitalist democracy with very strong rates of domestic growth and a culture of innovation. It was demutualised in 2017, and IPO’d in 2019. The shift in governance engendered by its rebirth as a publicly traded company has had the expected operational outcomes. Top line revenue has accelerated, operating income has more than trebled since 2019, and margins have drifted ever higher. The reasons for this performance are fairly straight forward - a lot of low hanging fruit is being harvested now that management is incentivised to do so.