The warnings against the consequences of the reform in the legal system also reach the reports of the Israeli companies traded on Wall Street. At this time of the year, the companies publish the extended reports for the 2022 summary, which also detail the risks inherent in investing in them.
● Goldman Sachs: “Risk to the shekel due to the local political storm”
● Game theory experts try to explain why there is still no compromise in the legal reform
● The chief economist at the Treasury warns: the legal reform may harm economic activity
Three companies from Israel trading overseas have detailed for the first time the risk related to the legal situation following the promotion of the reform. This is the geothermal energy company Ormat, which is traded on the New York Stock Exchange according to a market value of 4.7 billion dollars; In the company Solaredge, which deals in technology for solar energy, and is traded on Nasdaq according to a value of 16.6 billion dollars (the Israeli company with the highest value except Mobileye); and in the fintech company Riskypaid, which is traded on the New York Stock Exchange and its value reaches 939 million dollars.
It should be noted that among the law firms accompanying Israeli companies trading in the US there is currently no consensus on whether they should add to the disclosure report on this issue. Last week, lawyer Max Lindenfeld, from the Pearl Cohen office in New York, told Globes that he estimates that in the end the companies The Israelis will be required to report on the issue, although at this stage he recommends that they wait and see what the legislation will look like and what its effect will be.
However, it appears that other lawyers are stricter and recommend that their clients add such a disclosure already.
RISKIFIED: There may be an impact on the ability to recruit
As every year, companies operating from Israel warn of risks related to the security and geopolitical situation, the possibility of a boycott of Israeli companies and even the fact that their employees may be called up for active reserve service. Now they also add the law reform.
BRisquiped They wrote that “the Israeli government is currently working on extensive changes in the Israeli legal system. In response, private individuals, institutions and organizations, both from within Israel and outside Israel, have expressed concerns that the proposed changes will have a negative impact on the business environment in Israel, due, among other things, to the reluctance of investors foreigners to invest or do business in Israel, as well as due to increased volatility of exchange rates, credit rating downgrades, interest rate increases, increased volatility in the capital markets and other changes in macroeconomic conditions.
“The proposed changes may also have a negative impact on the labor market in Israel, or lead to political instability or civil unrest. If this type of development occurs, it may have a negative impact on our business, our results or our ability to raise additional funding if necessary.”
In the report of solaredge It states that “the new government in Israel has announced a plan to significantly reduce the judicial oversight of the Supreme Court, including reducing its ability to overturn legislation it deems unreasonable, and it plans to increase the political influence on the selection of judges.
“If government programs of this type are eventually accepted, they may cause operational challenges for us, because our headquarters and about half of our employees are in Israel.
“Furthermore, if the foreign policy is compromised, this may affect our business with suppliers and customers, which may adversely affect our reputation, the results of our operations and our financial condition.”
Ormat She stated in the report that “we cannot be sure if the plan will be realized and in what way. Therefore, we cannot know how investors will evaluate these issues, and whether these evaluations will negatively affect their perceptions regarding our business or our stock price, or will affect our operations in Israel.” .
Joining the alerts from the real estate companies
Last week, two real estate companies traded in Tel Aviv warned about the risks of the reform’s impact on their businesses. The Levinstein Property reports state that the changes promoted by the government in the legal system “may have a negative impact on the economic environment in which the company operates, on the cost of funding sources, on the credit rating of the Israeli economy, and more.”
Amot’s reports explicitly state that the changes in the legal system “could lead to a downgrading of the credit rating of the State of Israel, damage to investments in the Israeli economy and withdrawal of funds and investments from Israel, including in the high-tech sector… since in the opinion of the company’s management, Israeli yielding real estate companies are the future of the Israeli economy, as far as the described assessments above or some of them materialize, the financial performance of the company may also be affected.”