An analysis by BDI Coface of the companies traded on the Tel Aviv Stock Exchange (TASE) has found that despite the sharp rise in the number of companies holding IPOs in recent years, the number of companies with going concern qualifications attached to their financial reports by the auditors has fallen 60% in the past seven years.
In 2015, BDI Coface found that 12.7% of companies traded on the TASE had going concern qualifications attached to their financial reports, falling to 8.6% in 2018, and although rising to 8.9% in 2019, falling to just 5.3% in 2021.
This fall was despite the fact that 113 new companies joined the TASE in 2021, many of them startups and some of them with going concern qualifications at the time of their IPO. In many instances the IPO filled the company’s coffers with cash so that by their next financial report the qualification had been erased.
For example, driving safety company SaverOne (TASE: SAVR) held its IPO in June 2020 with a going concern qualification. But after successfully raising NIS 26 million, the qualification was removed for its fourth quarter and full year 2020 financial report.
A going concern qualification is attached to financial reports of companies by auditors to reflect concern that the company might not be able to continue as a going concern over the following 12 months and that it would not be able to raise financing or undergo a significant change in its business operations.
Of the TASE companies that did have going concern qualifications attached to their financial reports in 2021, BDI Coface found that 34% were technology companies, 20% were medical device and biotech companies, 12% were real estate and construction companies, and 11% were energy exploration companies.
Published by Globes, Israel business news – en.globes.co.il – on April 19, 2022.
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