Chairman of the Securities Authority: Every balloon ends up exploding – the capital market

The capital market regulator thinks it is working to stop inflated value issues, and protect the investing public. That’s not true but if she wants to be portrayed that way in her own eyes – who are we to interfere. At a conference of the Enforcement Department, the chairman of the Securities Authority, Anat Guetta, said that “the role of the Securities Authority is to safeguard the interests of the investing public, from regulating existing and new areas of activity in the capital market, through supervision and enforcement.”

In recent years, companies have seen that they are unable to raise funds in the world, and have come to Israel to raise money. The boom in the capital market is a welcome thing, but not when bad companies come, but Guetta chooses to ignore it and says: “In the last year we see that our efforts are bearing fruit and the public capital market is expanding. We see the public capital market in Israel – international model issues – ie. That companies issue here in Israel and enjoy the investment of international investors. ”

Each balloon ends up exploding
By the end of the first quarter of the year, the number of issues on the local stock market has already surpassed the number of issues last year (some companies – inflated) and Guetta refers to this: “We welcome the turnaround in the capital market – from dry to lively capital market.” The entry of technology companies into the public capital market is very important – the stock exchange should reflect the range of industries in Israel, including high-tech, which is a national resource.

“We monitor the issues, study them and see what happens to the value of the stock – every balloon that inflates ends up being deflated or worse, even explode. Therefore, we do not perfume the growth data in the issues – we are constantly on the pulse, checking, fixing, improving. , Balances and if necessary, also restraints.I do what is right for the investor and the market.I do not do what they want to hear or what looks good.

“The only interest before us is the public interest of the good of the investors and the responsibility for the realization of this interest – rests on our shoulders. Therefore we take and take all necessary steps to ensure that the public interest is optimally implemented and work to prevent the ‘Wild West’. Because in our opinion it may exist.

“We scrutinize all the factors in the IPO chain and make sure they act in accordance with the law – we will not allow round corners or produce defective practices. We are in touch with companies, and alongside ongoing oversight, conduct audits and wherever necessary – operate the PA’s enforcement arm.

“And in the context of enforcement, as we have gathered today – enforcement is one tool in the toolbox that the legislature provided to the Securities Authority to fulfill its role and it is not an end in itself. Enforcement activity is intended to strengthen the confidence of investors and issuers in the capital market. For the existence of a market, therefore, in order to provide the security and legitimacy of the trading activity, effective enforcement is required, among other things. ”

Well spoken. Actions of the Authority? Not really
Guetta’s critique in its place. In recent months, a wave of issues of companies with values ​​that do not correspond to reality has been observed on the stock exchange. The companies prepare a prospectus (sometimes missing, sometimes without proper disclosure as required) and go out for a road show. Sometimes they switch between different rating companies until they get the inflated value they want to achieve. After all, it is not easy: the issuing companies are the ones that pay for the work of the rating companies. The value obtained is not high enough? Payment in jeopardy. Is the value not high enough? Oh well, you can always switch to another rating company that will give the value that the company wants to get.

It is a known fact that rating companies are not really able to predict the rise and fall of companies, and funny (or sadly) they may recommend a ‘sell’ after a stock has crashed by tens of percent, or a ‘buy’ recommendation after the stock has already made its rally. But it is not difficult to come to the rating companies with complaints when in practice they receive the salary from the companies themselves. Not coincidentally, even in the great financial crises the rating companies did not know how to predict the developing bubble and came out in a negative light. But as long as the regulator does not intervene (did anyone say Guetta?) What do you want from the rating companies themselves? In the end – they also want to make a living.