It was a long time ago, but those who were there cannot forget – the bank stock crisis, the great collapse of the stock market in 1982-1983. The money was deleted. Everyone’s money – then, unlike today, everyone invested in the stock market, mainly in bank shares. The banks were a hit and it’s true it’s somewhat reminiscent of the last few years. So the regulation was also weak and the regulations were recommendations. So – bank advisors and officials pushed the bank shares to the public. There was a process that in retrospect turned out to be stock running. It was called more than laundry – the regulation of bank shares. But it was a run of shares by the banks through the public. 40 years have passed since then and nothing has really changed. the world keeps on turning. The regulators try to close loopholes, but the sophistication of the firms is greater and they escape from the strict definitions, and find loopholes. Bank Leumi bought its own shares non-stop – they call it an expression of confidence. What is it really? regulation Every self-purchase hides within it regulation. This is a very problematic move. So it’s true – it’s not sending the public’s money to support the stock, but what’s the difference actually – the money from the company and not that of the public regulates the shares. So what? If you think about it, at Bank Leumi it is also public money.
Leumi has finished the series of acquisitions, now the insurance companies are acquiring themselves, they are not alone, this is a big global wave washing over the stock exchanges. This is the doomsday weapon against the declines in the markets. This is how you actually broadcast to the public that you support the stock, this is how you actually support it, this is how you prevent sharp declines in the stock (as much as possible). It’s a WINWIN for the shareholders, for the company’s managers. But the question is whether it is correct? And the question of whether this is an effective weapon or, similar to the bank stock crisis – the end of all regulation to be exposed? After all – regulation is artificial. At the end of the day, the economy wins and if there are no self-purchasing regulations, the price converges downward. This is not what happened at Laumi – the own purchases at Laumi lost ground in Corona, but there is now a significant profit there. It was financial.
One of the most interesting cases in recent months of the purchase of a regulatory tree is the stock exchange itself. The stock exchange buys shares of the stock exchange. Yes, she exudes confidence. Yes, she actually buys, which means she really believes. But is it normal for such a body to support its own share price? What is the difference between self-purchase and regulation?
These purchases are part of the daily cycle, they are part of the trade and they affect the trade. Do we want companies to influence the trading of their shares? Apparently, there is no problem with this – the company’s managers find it appropriate that a good investment is in the company’s shares and purchase, but do they purchase with a price limit, do they purchase at any price, do they purchase to prevent a drop below a certain price? Trading a stock is a discipline in itself, but it is important to know that price determination can be caused-determined by a turnover lower than the total daily turnover. A share can trade unchanged for most of the day with a turnover of NIS 4 million and in the last hour with a turnover of NIS 200 thousand it will increase by 2%. The type of transaction, the limit of the transaction, has more significance on the price than the cycles. And the meaning is that with self-purchase you can regulate the price even at a low amount in relation to the total daily amount.
This tool of self-purchase is regulated and should be free from direct judgment of the companies’ management, usually it is through an external portfolio manager, but there are still many similarities to regulation, one that is very close to running-support.
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has been in a blitz of self-purchase of its shares in recent months. So far, the stock exchange has purchased over 1.7 million shares for an estimated cumulative amount of approximately NIS 26 million. Why does she do this? It seems that the main motive is an expression of confidence and an overflow of value for the investors. The management of the stock exchange believes that an investment in the shares of the stock exchange is better than another investment. Not sure that’s true. The stock market trades at a multiple of nearly 30, the annual yield derived from this is about 3.3-3.5%. There are probably better investments. What’s more, the capital market has been shaking for the past year. The capital market is the engine for the results of the stock market, and there is a great risk for the continuation. So right now to purchase your own shares? Filled if it was at a bargain price.
But the regulation works. The company’s stock rose in the last month alone by 9.5%. The problem is with this regulation, and we will take you back to other regulations – and the biggest of them all in the 80’s. Regulation works until it doesn’t. If you hold the nose of the stock market stock, then the support will be reduced-released, the stock may go down. So you have to be careful.
Below is a table showing the company’s last 15 acquisitions:
The stock exchange started the purchases on May 29, 2022, when it owned only about 30 thousand shares, but as of today it already owns over 1.7 million shares. As you can see from the table, it shows a very clear consistency both in the rate of purchase and in the amount of shares in each purchase – something that may indicate that it is in the middle of the move and has not yet taken its foot off the gas.
The shares of the Tel Aviv Stock Exchange have increased since the beginning of the year by 2.6% to a price of NIS 17, representing a value of NIS 1.71 billion. And this while the results do not show significant growth. The company’s profit in the first half amounted to NIS 28.9 million on revenues of NIS 188.6 million. In 2021 as a whole, the company earned NIS 45.5 million on revenues of NIS 323.6 million. The value expresses a profit multiplier of 32.5.
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