Are even large Israeli technology companies starting to see the local stock exchange as an alternative to an IPO on Wall Street? This week, fintech company Nayax filed a draft prospectus for a $150 million (NIS 484 million) offering, at a pre-money valuation expected to be over $1 billion – a valuation that in the past would straightaway impel the company’s flotation overseas. The flotation includes an offer for sale by the company’s founders – brothers Yair and Amir Nechmad and David Ben-Avi – who will sell shares to the tune of NIS 194-234 million.
An interesting aspect of Nayax’s forthcoming IPO is that it is structured as an international offering on the Tel Aviv Stock Exchange. The underwriters are Jefferies, with Oppenheimer and Leader Capital Markets. Jefferies will bring overseas investors to the offering, and according to sources familiar with the matter, more than 60 meetings have so far been arranged with global investors, even before the roadshow.
Nayax is talking to investors from Australia, Europe, the US and Israel, the aim being to contact over 100 foreign investors, and as far as is known there is high demand for these meetings.
This is the third offering held on the Tel Aviv Stock Exchange on an international model: Jefferies led the flotation of the stock exchange itself in 2019, and also led the flotation of cut-price retail chain Max Stock in 2020, two offerings that were successful and in which a considerable portion of the shares were sold to overseas investors.
370,000 points of sale in 50 countries
Nayax was founded in 2005 as a provider of payment solutions for operators of automatic vending machines. It later expanded its range of solutions, and it now offers customized payment methods, a mobile wallet application, and more.
Nayax’s business model is based on retail subscribers who make a monthly payment for the service and payment clearance. The company says that in 2020 it cleared about half a billion transactions. It currently supports more than 370,000 points of sale, and through distributors is active in 50 countries.
Yair Nechmad previously managed mineral water company Eden Springs (Mei Eden). Ben-Avi is a technology entrepreneur, and Amir Nechmad was a real estate lawyer and investor.
Amir Nechmad holds 31.4% of the company, fully diluted; Yair Nechmad holds 31.2%; and Ben-Avi hols 30%. Fintech company Safecharge, which used to be controlled by Teddy Sagi, invested $17.4 million in Nayax in 2018, and also bought shares from the founders, but it exercised a put option to sell the shares back to the three.
In the offer for sale in the framework of the IPO, Yair Nechmad will sell 4.9 million shares, which at the expected offering price (NIS 10-12 per share) will fetch NIS 49-59 million. He will remain with shares worth NIS 866 million-1.04 billion. Amir Nechmad will sell 6.5 million shares for NIS 65-78 million, and will remain with shares worth NIS 930 million-1.1 billion. Ben-Avi will sell shares for NIS 81.3-97.5 million, and will remain with a holding worth 796-955 million.
Growing revenue, rising loss
Nayax employs 400 people, 270 of them in Herzliya, and about 40% of its workforce is employed on research and development. According to the company’s presentation, it accepts more than 80 kinds of payment and 40 currencies, and it has cooperation agreements with Mastercard, Visa, PayPal, Apple Pay and other payment companies. The company sees the use of cash declining from 42% of transactions in 2018 to 33% in 2023, while the vending machines market in 2025 will be worth almost double what it was worth in 2019, at $24.6 billion.
In 2020, Nayax had revenue of $78.8 million, 23.8% more than in 2019. In the past two years the company has posted an operating loss ($2.2 million in 2020), although it had an operating profit in 2018.
The net loss in 2020 was $6.1 million, up from $5.5 million in 2019 and $3.6 million in 2018. Cash flow from regular activity was, however, positive at $6.5 million in 2020, after a negative $1.4 million in 2019. At the end of last year, the company had cash and bank deposits amounting to $9.1 million.
The prospectus states that, last January, the three founders and controlling shareholders signed a loan agreement with an Israeli financial institution, which lent them $5 million each, $15 million altogether, for financing the company’s activity by means of owners’ loans.
The loan principal bears annual interest of 10%. When the flotation takes place, the borrowers will be obliged to repay it in full. The loan agreement include a lien on 16.9 million shares of each of the borrowers, or 50.6 million shares altogether, which will be worth NIS 500-600 million in the IPO.
Published by Globes, Israel business news – en.globes.co.il – on April 29, 2021
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