Tel Aviv Stock Exchange Index Set for Major Reshuffle

The Tel Aviv Stock Exchange is preparing for its semi-annual index review on November 5th, with the crucial "ten determining trading days" beginning this Thursday. This period is particularly tense for real estate developer Yigal Dery, who faces potential exclusion from the TA-35 index for the fourth consecutive time. In past attempts to remain in the index, Dery raised approximately 1.4 billion shekels, sold land, and shifted shares internally. He also issued options worth 420 million shekels to institutional investors. However, this time, his task is significantly more challenging. To stay in the TA-35, a company must rank among the top 39 by market capitalization, calculated from the average share price over the ten determining days multiplied by the number of registered shares. Dery currently stands at 47th place with a market cap of 8.76 billion shekels, reflecting a broader decline in real estate stocks over the past six months. He needs an additional 1.4 billion shekels in market value to reach the 39th spot, currently held by Meitav Investment House at 10.2 billion shekels.

Besides Dery, two other companies are likely to be removed from the TA-35. Food retailer Shufersal, ranked 42nd with a market cap of 9.68 billion shekels, is heading for exclusion after weak second-quarter earnings. The third company on the brink is Kanon, controlled by Idan Ofer, which returned to the index in the last review but is now 40th with a market cap of 10.1 billion shekels. The removal of these three stocks is partly attributed to the dual listing of cybersecurity giant Palo Alto Networks, which joined the TA-35 in August. Due to Palo Alto's rapid inclusion, the index temporarily has 36 stocks, necessitating the exit of one stock to return to the standard 35.

Palo Alto Networks will increase its weighting in the TA-35 and TA-125 indices to 2.56%, expecting over 800 million shekels in demand. With one stock exiting, the number of new additions will be reduced. Renewable energy firm Doral, up over 200% this year and ranked 34th with a 11.5 billion shekel market cap, is the leading candidate for promotion. However, it faces stiff competition from rival renewable energy company Energix, ranked 35th with a 11.4 billion shekel market cap. Hotel chain Fattal, currently 36th, is a less likely but possible candidate for promotion if it can surpass Doral or Energix in market value.

Significant changes are also expected in the TA-90 and TA-125 indices. Companies exiting the TA-35 will likely join the TA-90. Construction company Tidhar has practically secured its spot in the TA-90. Other potential entrants include biomd company Alpha Tau, chip company Telsys, infrastructure firm Afcon, and real estate company Avisror. Defense simulator company Bagira is also in contention. Conversely, Electra Real Estate, Erit, and Qualitao are set to be removed from the TA-90 due to significant value erosion. Other companies like Ackerstein, Sela Real Estate, Nassei VeBinyan, and RP Optical are also at risk of exiting the TA-90, while Mor Group, SolarEdge, and Donitz are currently holding their positions.