Last week, the Israeli cyber company Father Security completed its entry into the American NASDAQ stock exchange, but it was a very disappointing entry. Instead of an IPO through a merger with Spak – that is, raising funds from investors as part of a merger procedure with a skeleton stock exchange – Father Security’s investors actually received a NASDAQ registration “K” and deleted from the Tel Aviv Stock Exchange.
In the original transaction, Hav Security was supposed to carry out the merger at a value of 1.3 billion dollars, which was 6 times higher than the value at which it traded on the Tel Aviv Stock Exchange on the eve of the completion of the merger (NIS 740 million), however, since the investors in SPAK withdrew the money they had invested in the issuance of SPAK, and the investors who committed To invest in the second stage of the offering, the PIPE stage, they did not fulfill their commitment, the event was actually not an offering but a kind of listing to the NASDAQ stock exchange, which was done according to the parent’s value on the Tel Aviv Stock Exchange – NIS 740 million.
Since Hav Security began trading on Nasdaq, its stock has fallen by 25% compared to the price at which it was delisted from the Tel Aviv Stock Exchange, and today the company’s market value is only $150 million.
The person who was harmed because of this is Eildev Investments, which is traded on the Tel Aviv Stock Exchange. Eildev reported yesterday that it liquidated its investments in Hab Security on Tuesday (February 7) and is therefore expected to record a loss of NIS 5.5 million. Eildev focuses on managing investments and assets of traditional companies in which it Identifies improvement potential, especially in the field of real estate, industry and trade.
Eildev’s holding in Parent Security originates from Eildev’s sale of its subsidiary Comsk to Hav in September 2021. In return for the sale, Eildev received NIS 40 million in cash and NIS 30 million in shares, which constituted 8.2% of the share capital of Eildev. The shares were locked up until March 2022, which means that until this date it is forbidden to sell them. However, according to the data of Eildev’s holdings recorded in the financial report, it has so far chosen not to exercise them, apparently due to restrictions and also due to faith in the cyber company. As of the end of last June, Eildev held 6.3% of the parent’s shares, and they were valued at fair value of NIS 40.3 million. That is, in Eildev’s books, the value of Hav Security was NIS 640 million. This week, apparently, Eildev sold the parent’s shares on Nasdaq at a value ranging from 150 to 160 million dollars, which is 16% lower than the value of the parent in the books and hence the loss.
In March 2022, the parent reported signing a merger agreement with the Spark Mount Rainier, which raised $173 million as of that date. In addition, the parent received a commitment from 4 institutional bodies to invest 50 million dollars in the company. However, this time the institutions decided not to transfer the money and thus the SPAC issue that was supposed to bring in billions of dollars to the company was canceled and the investors were left with losses of tens of percent.