Pasternak Shem Investment House Raises $19 Million in Tel Aviv IPO

Pasternak Shem Investment House has successfully completed its initial public offering on the Tel Aviv Stock Exchange, raising NIS 70 million (approximately $19 million) at a pre-money valuation of NIS 280 million (approximately $76 million). Following the capital raise, the company's valuation stands at around NIS 350 million (approximately $95 million), with new investors holding approximately 20% of the firm. Prominent investors include Itzik Oz, head of Phoenix Agencies, and Professor Yitzhak Soari's Allday Group, each acquiring less than 5% of the company to remain below the threshold for controlling interest. Together, these two investors contributed close to NIS 30 million (approximately $8 million).

Institutional investors' participation was relatively limited. The IPO price was slightly lower than initially discussed, with Pasternak Shem initially targeting a pre-money valuation of NIS 300 million (approximately $81 million) and aiming to raise between NIS 60-75 million (approximately $16-20 million). While the valuation decreased, the company successfully raised NIS 70 million, near the upper end of its target range.

Pasternak Shem reported a profit of approximately NIS 27 million (approximately $7.3 million) in 2025, a significant increase from NIS 10 million (approximately $2.7 million) in 2024 and NIS 9 million (approximately $2.4 million) in 2023. Revenues also surged, reaching approximately NIS 56.5 million (approximately $15.3 million) in 2025, more than double the previous year. This growth was primarily driven by mutual fund operations, an increase in managed assets, and activity in trust hedge funds, with one of its largest equity funds managing over NIS 2 billion (approximately $540 million).

The IPO valuation, based on 2025 earnings, reflects a multiple of just over 10 times pre-tax profit and approximately 13 times after-tax profit. This is considered a moderate valuation, provided the company can maintain its recent profit levels. However, 2025 was a strong year for the Israeli market, benefiting investment houses from market rallies and fund inflows. The outlook for 2026 is less certain, with Pasternak Shem experiencing hundreds of millions of shekels in redemptions since the start of the year, indicating continued outflows from some funds.

The capital raised will fund Pasternak Shem's expansion, particularly into insurance, pension, and provident fund sectors. The company is exploring the acquisition of a 50% stake in an insurance agency, which could provide an additional income stream and reduce its reliance on the capital markets. Founders Eran Pasternak and Shi Shem, who established the investment house in 2010, retain controlling interest with approximately 80% of the company post-IPO. The key challenge ahead is to demonstrate sustained performance and prove that the 2025 profit was not an anomaly but a sign of increased scale and profitability.