Taking a State-Owned Defense Company Public - with Natti Ginor

Summary

Podcast Summary: "Taking a State-Owned Defense Company Public – with Natti Ginor"

What's Your Number? – Ark Media
Hosts: Yonatan Adiri & Michal Lev-Ram
Date: January 28, 2026
Featured Guest: Natti Ginor, Managing Director & Head of Israel Investment Banking, Jefferies

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Overview

This episode dives into the much-rumored potential IPO of Israel Aerospace Industries (IAI), one of Israel’s largest and most storied state-owned companies. Hosts Yonatan Adiri and Michal Lev-Ram sit down with Natti Ginor, a veteran investment banker with deep ties—both professional and personal—to IAI. Together, they explore the cultural, strategic, and economic implications of taking a government-owned defense giant public, contextualizing it within Israel’s broader transition from state-led to globally integrated tech economies.

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Key Discussion Points & Insights

1. Opening Numbers and Israeli Financial Resilience

• Hosts’ Numbers:
  • Yael: “My number is 662 billion shekels. Yup, that's the 2026 state budget.” ([01:14])
  • Yonatan: “Mine is 68.6... Israel's debt to GDP figure is 68.6... considering the country spent nearly 350 billion shekels of otherwise unplanned expenditure on the war.” ([01:48])
• Context: Despite war-related spending, Israel’s economy demonstrates resilience, finishing with a better-than-expected debt-to-GDP ratio.

2. Market Recap and Tech Trends ([03:20–10:47])

• Windex Performance:

  • Israeli tech stocks (the “What's Your Number Index”) remain strong but are facing increased volatility amid global trends.
  • Standouts: Lemonade's stock up due to AI-driven insurance innovation; WIX’s restructuring with an “X engineer” AI-focused workforce.

• Notable moment: Lemonade’s bold move to offer a 50% premium reduction for Tesla FSD drivers leads to global buzz, amplified by Elon Musk’s tweet:
  “Insurance is half price when Tesla self-driving is activated because it increases safety so much.” ([Words of the week, 34:10/35:52])

3. Introducing the Guest: Natti Ginor of Jefferies ([10:47–12:25])

• Longtime supporter of Israeli companies accessing global capital.
• Described by hosts as having “steadfast” dedication to Israel’s innovation ecosystem.

4. Personal and Historical Roots of IAI ([13:13–14:20])

• Natti shares a family history deeply intertwined with IAI, with both his grandfather and father contributing to the company from the 1950s onward.
• Emotional resonance: “IAI… is viewed as one of the most formative companies in Israel’s history.” ([14:20])

5. IAI’s Role in Israeli Society & Economy ([14:20–15:27])

• IAI is not only a commercial venture but a symbol of national innovation and self-reliance, a major employer, and a generator of government revenue.
• “Today it’s by far one of the largest private companies in the country, valued at somewhere between $20 and $25 billion... $870 million of EBITDA in the trailing 12 months ending 2025.” ([14:46])

6. Why Take IAI Public? The IPO Conversation ([17:18–21:56])

• Capital Needs: Post-war Israel sees IPO as a significant potential source of capital—selling even 10–15% could raise $3 billion+.
• Complex Decision-making: Unlike private firms, IAI’s IPO will be influenced by the Ministry of Defense, Ministry of Finance, and other state actors grappling with issues like security-sensitive disclosures and legal jurisdiction.
• Dual vs. Local Listing: The government may opt for an Israel-only IPO initially, considering legal comfort and national interest, then expand to global investors.
• Comparison to global defense IPOs, notably the recent $4bn IPO of CSG in the Netherlands: “Very similar size of company… traded up 30-40% on day one. That is the type of process I believe would be best for IAI…” ([19:52])

7. Strategic Roadmap: One Step at a Time ([21:11–23:07])

• The hosts put Natti “in the CEO seat” to pitch an optimal go-to-market strategy.
• Natti advocates for starting with an Israeli listing, building trust and performance, then possibly extending to global investors while addressing legal concerns: “Instead of 9 or 10 large shareholders, 25 or 30 world class shareholders.” ([22:41])

8. Cultural and Organizational Shifts ([23:07–25:27])

• IPO as a catalyst for transforming IAI from a staid government entity into a competitive, performance-oriented enterprise.
• Expected timeline for the process: “Longer than people expect… probably six months plus out.”
• Parallel IPO interest: Rafael, another state-owned defense giant, is six to twelve months behind IAI in its preparation.

9. Winners and Losers: Who Stands to Gain (or Not)? ([25:27–27:47])

• Winners:
  • State of Israel: access to capital and tax revenue.
  • Investors: both local and (eventually) global.
  • Tel Aviv Stock Exchange.
  • IAI itself: operational flexibility, top-tier leadership, M&A potential.
  • Natti: “I think the only losers are the competitors. I think it’s good for everyone.” ([26:41])
• Competitors:
  • Elbit Systems: Could be impacted by new benchmarks but likely benefits from the sector’s overall growth.

10. Global Dynamics & Competitive Environment ([27:47–31:14])

• Elbit currently enjoys premium valuation due to its strong European ties and current geopolitical realignment in Europe.
• Discussion of pricing power: high margins possible while demand and innovation are strong, but some margin compression may occur as competition intensifies.

11. The Case for Continued State Control ([31:14–32:06])

• “I think you have to maintain government ownership and control over these companies. They’re so fundamentally critical to national defense... having IAI and potentially Rafael remain within government control is advised in Israel, more so than probably anywhere else in the world.” ([31:23])
• Government likely to retain 85% ownership even after IPO.

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Memorable Quotes and Notable Moments

• On IAI’s IPO debate:

  “This company is in a unique position... decisions are not being made by kind of traditional business people the way they are, let’s say, at a company like Elbit... They’re kind of wrestling with things like disclosure, things like potential exposure and liability.”
  — Natti Ginor ([17:42])

• On IAI’s symbolic status:

  “Israel dreamt of having an aviation industry when [it] had almost no cars. There were no cars on the roads... But there was a small, tiny group in Israel busy with imagining an 860 million EBITDA... globally bleeding edge industry.”
  — Yonatan Adiri ([15:27])

• On cultural changes required:

  “We’re going from being a government enterprise to a private enterprise. So you’re right in that that’s a lot more manageable when you start with people that... will give it a little bit of, quote, latitude as it kind of evolves.”
  — Natti Ginor ([23:45])

• On government control post-IPO:

  “Having IAI and potentially Rafael remain within government control is advised in Israel, more so than probably anywhere else in the world.”
  — Natti Ginor ([31:23])

• Elon Musk’s viral endorsement of Lemonade (Words of the Week):

  “Insurance is half price when Tesla self driving is activated because it increases safety so much.”
  — Elon Musk, via Twitter ([35:52])

• On European reforms and defense tech opportunity:

  “We have become the world’s champion of over regulation. Zero growth. Pay attention to Germany. I think it’s a founding president of this Republic. Markets love it. 18% DAX increase 2025 and defense and tech investors also.”
  — Yonatan Adiri ([36:37])

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Important Segment Timestamps

• Financial Numbers & Economic Context: [01:14–02:23]
• Market Commentary: Windex & Tech Trends: [03:20–10:47]
• Guest Introduction – Natti Ginor: [10:47–12:25]
• History & Symbolism of IAI: [13:13–15:27]
• IPO Rationale & Challenges: [17:18–21:56]
• Listing Strategy & Globalization: [21:11–23:07]
• Cultural Change at IAI: [23:07–25:27]
• Winners & Losers: [25:27–27:47]
• Sectoral & Global Competition: [27:47–31:14]
• The Argument for State Control: [31:14–32:06]
• Wrap-up & Reflection: [32:32–34:10]
• Words of the Week: [35:52–37:28]

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Podcast Tone & Language

The conversation blends analytical precision with insider candor and a sense of national pride—connecting big economic questions with personal stories and contemporary market realities. Natti Ginor’s familial connections to IAI lend gravity and warmth, while the hosts’ dynamic combines wit with thoughtful questioning.

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Summary Takeaways

• The prospective IAI IPO is more than a financial event; it’s a cultural pivot point for Israel’s tech and defense sectors.
• Going public will require careful navigation of security, legal, and cultural hurdles, including labor relations, disclosure norms, and government oversight.
• Both local (Israeli) and, potentially, global investors see massive upside—if the IPO is timed and structured properly.
• IAI’s transition from a government-owned symbol to a public company illustrates wider trends in Israeli innovation: necessity-driven ingenuity meeting global capital markets.

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For Listeners Who Missed the Episode

This episode is essential for anyone interested in the intersection of defense technology, government policy, and global capital, with valuable insights into Israel’s evolving economic landscape, drawn from the lived experience of an industry insider. The conversation is candid, informative, and packed with storytelling that elevates it well above a standard financial debate.

Transcript

[A]

Before we start today's episode, here's a word from our sponsor. I'm sure some of you are already familiar with the sponsor of this episode. That is sapir, the free quarterly journal of Jewish ideas edited by Bret Stephens. And I'm excited to share that the next issue will feature an article by yours truly. Yes, alongside our VPRND at Alenu Shahar Lotan, him and I wrote an article about how Israel can make itself indispensable to the global economy, and very much looking forward to seeing it being published in the next issue of sapir, which will be out shortly. Be sure to sign up for free today so that your subscription begins with the very next issue. On the theme of aspiration, I know Dan always says on Call me back that they should be charging for it, but fortunately it is still available for free in print for all subscribers in the US so please go on sapirjournal.org what's your number? No apostrophe to sign up. That's the purejournal.org what's your number?

[B]

You are listening to an art media podcast.

[A]

So Yael, what's your number?

[B]

My number is 662 billion shekels. Yup, that's the 2026 state budget.

[A]

Big number.

[B]

That's a big number. Excluding debt servicing. And right now we're on the ticking cl. I'm depending where you are in the world and what time of day it is. As of recording, we're 48 hours and counting to the last chance to pass a state budget in its first vote. A reminder, you need three votes to pass and it isn't approved by the end of March. Then we have to early elections are called and that would be for July in this case. So Yonatan, what's yours?

[A]

Mine is 68.6. Yesterday was a big day for financial data in Israel. Both the Ministry and the Chancellor of the Central bank issued their 2025 reports. Israel's debt to GDP figure is 68.6. That's lower than 70 where it was throughout the war. This is pretty incredible considering that the country spent nearly 350 billion shekels of otherwise unplanned expenditure on the war. To finish that, with less than 70% debt to GDP is a huge example or demonstration of how resilient the Israeli economy is.

[B]

Who's number wins? I'm going to give you the win.

[A]

Mine is positive.

[B]

It's a story of resilience. This is not the tit for tat that we're seeing in politics. We've been in this kind of scenario. We know how it ends.

[A]

It's 3pm on Monday here in Tel Aviv. We are both set for an 8am New York stormy weather. New York interview with Nati Guino. He's back on the podcast. He's of the leading investment bank Jefferies. We're going to talk with him about the rumors for IAI Israel Aerospace Industries IPO, which is going to be pivotal and important. 2026, we'll be putting Nati in the CEO seat and kind of trying to understand the limitations, the winners, the losers of this potential ipo.

[B]

But first, as usual, we're going to take a look at the some of the week's pressing news, AKA our big shorts. And of course, the latest update on the Windex. The what's your number Index attracts the performance of publicly traded Israeli based or founded company.

[A]

You know, as we record, just to kind of reflect how crazy the situation in Israel is in terms of news and what we're busy with. The body of Ran Gvili, the hero soldier, was just repatriated to Israel. So as of 10 minutes ago, no bodies, no live hostages remain in Gaza.

[B]

Okay, let's kick things off with this week's Windex. Jonathan, how is it looking?

[A]

So bad news, bad news. This week we see a mirror image between the Windex and its brother and sister, the S&P 500 and Nasdaq both on the app, 0.73% for S&P, one and a half almost for Nasdaq. But rest assured, Windex is still leading from the beginning of 2026. It is now up 2.61 year to date compared to 1.12 for the NASDAQ and 102 for the S and P. As expected though, after the Elon Twitter storm, Lemonade leads the chart with 21.6% rise on the week. It is a one year peak in terms of its market cap. The market's also responding to WIX changing its development strategy with five and a half percent rise this week. We're going to talk about that in the big shorts via Transportation. Our latest joiner to windex is down 47% since the IPO. Not a well received IPO by the way. On the same ground and concern that WIX and Monday are seeing, the question is what does AI do? Tesla's about to launch their robo taxi. What does that do to transportation as a whole? That's weighing heavily. Also on via that said, this week they're up 16%. There is a correction going on there so, yeah, in the red, relevant to the episode today, we see elbit correcting at about 3%, still up almost 20% since the beginning of the year. Vi, you know, kind of living comfortably in its peak market cap ever. Historic market cap for them, Palo Alto Networks with 2.18% negative year to date opening. Palo Alto carries about a third of the Windex. Right. So when Palo Alto is not doing well, Windex tends to be in the red. Its market cap at roughly 125, $130 billion, sort of, you know, overshadows most of the other sectors in the Windex. It is interesting to see Israeli cyber stars sort of getting into the freezer. And I think that's a great segue to our first big short, which is wix. You know, we call them big digs, the big digital. Israeli companies on the Windex in general traded in the US Definite headwinds coming in from the AI narrative that goes all the way from Via to Etoro, all the way to Monday. And n Wix.com, wix is actively trying to change that narrative. And I think it's very interesting with wix. Let's talk about the news. So this time CTO Yaniv, even Chaim, not near Zohar, which we quoted last week, shared on X, his letter introducing a new type of engineering, I would say category, globally speaking, they call them X engineer, basically an AI native design first engineer with end to end ownership. The letter goes on and on to talk about how guilds, which are ideas that WIX brought to the world in terms of how do I run a company with different products through guilds, the design Guild, the DTC guild, the marketing and so on. A massive, you know, cultural shift at wix aimed at being communicated to the public and by that to the market. You know, we're not taking a step back. We're going to leverage AI, we're going to win. And even though the stock is, you know, 60% down from its peak, we're going to win the trust of investors. And, you know, I don't know how you feel about that. Is it more narrative? Is it more, you know, product launches? We saw Neil Zohl talking about how excited he is for the super bowl ad coming up. And so where do you stand on that?

[B]

It's definitely a narrative. It's a bit of branding. Another week, another letter from wix and the Internet blows up the X engineer. Just looking online and also kind of looking at exactly how the CTO kind of wrote out what the roles and Responsibility of the X engineer would be, you know, the cynics among us will say, okay, aren't you just basically describing a full stack engineer? Like many companies have stopped working in that front end, back end model and we've all become kind of AI native. And if you haven't, maybe that's kind of telling part of the story. You know, there's a lot of cynicism around that. You know, the reactions online show that tension between those who are going to go full in on AI and start working or those who are going to kind of dance around it. And, and I don't think it's just about wix. WIX is being pretty brave and putting out their communications for all the world to see.

[C]

I agree.

[B]

But it's a window kind of into how tech companies everywhere are really navigating AI talent and survival.

[A]

Yeah, look. And as an ex speechwriter, this reminded me of the famous Roosevelt speech. The man in the arena. We are seeing Wicks in the arena owning it, saying, look, it's hard. We understand the market's concerned. This is a hard period. We're in the thick of it and we're the people in the arena, so shut up.

[B]

Exactly. Well, Lemonade has broken the rules really, and gone against the classic insurance playbook and tipped it on its head once again. So this is referring to the new 50% premium reduction for Tesla FSD drivers. It's an incredible leap of faith. It's a move that was so radical that it drew Elon Musk's attention and a lot of the retail investors that invest, and not only retail, a lot of the investors that are interested in Lemon also interested in Tesla. And so this was kind of a genius move because it really got the attention of not only of Musk, which then tweeted, and his Tweet is now 31 million views for over 24 hours. But it really kind of showed that Lemonade is putting its money where its mouth is and showing the world it's willing to kind of take the classic insurance playbook and say, we've been building with AI really since day one. This is not some kind of patch or lipstick on a pig. This is something that we've been building. And we know because the way we've built specifically for car insurance, we know so much data and so much about the driver that we know how to price the risk in a way that is maybe for classic insurance suicide. But for us it's just accuracy. It's real time connectivity to the car's brain at the end of the day. Insurance is a game of statistics and data. This is lemonade. Underwriting the future.

[A]

To me, I think contrary to big Short number one, there is a lot of narrative here. We had Daniel Schreiber, one of the founders of the company, on the show a couple of weeks back. You hear that the guy is busy with AI for quite a long period of time. So narrative is definitely going on. But there is product here that connects to the brain of the car in real time and if you activate it, you're eligible for the discount. This comes at the heels of HTSA data and also Tesla FSD data that shows one fatal car accident per 10 million miles. That is 20 times better than a human driver. Right. And it comes at the heels also of Waymo, that's Google's autonomous taxi showing similar type of statistics. 91% better than human beings in terms of fatal injuries for the robo taxes by Waymo. So it's grounded in truth. But you always need the first person to make the leap of faith. It's exciting to see an Israeli company make the leap of faith, showing the rest of the world, the state farms, the geicos of the world, what can be done. And again, it's all done naked. It's in the public market. If it works. Numbers are going to have to be proven out on this thesis. Really, this is inspiring stuff coming this week.

[B]

And just to summarize, I can summarize with the word conviction. We are seeing a lot of conviction in the markets online and then definitely in Israeli tech. All right, Yonatan, let's go to the long play. Today. We're going to be joined now by Nati Ginor, a managing director and Jefferies, head of Israel Investment Banking. Nati joined Jefferies in 2011 and he brought his vast experience in financial services across research, sales and trading businesses across sectors. Now, in his current role, he is responsible for devising and implementing the firm's strategy in Israel across all products. Nati was born in Israel and fluent in Hebrew and he holds dual Israeli and US citizenship. So very relevant for today's show. And as you've heard on the show before, Nati is most definitely steadfast in his dedication to supporting Israeli companies and investors, really drawing global capital into Israel. And that's why he's really the perfect guest to zoom in on iai. It's of course Israel Aerospace Industries, and for the listeners that maybe don't know, don't live and breathe this world, it's one of Israel's largest, most important tech companies, but also maybe the most, least understood because it sits right at that intersection of government security and global markets. And there's been recent reporting, rumors, whatever you, whoever you speak to will tell you something else basically that IAI is exploring an ipo. And that opens up a much bigger conversation, not just about iai, but also about how Israel thinks about defense tech ownership and growth in global markets very much broadly. So, Nati, what's your number?

[C]

So two numbers. The first one is 1.44 billion shekels and the second number is 4.6 billion shekels. The first number, 1.44 billion shekels, is the average total notional value of shares traded on the Tel Aviv Stock Exchange on any given Sunday in 2025. The 6.4 billion shekel number, amazingly, is the number of total notional value of shares traded this past Friday, January 23rd, the third Friday ever of trading on the Tel Aviv stock exchange, a 219% threefold increase of notional value traded throughout any Sunday in 2025. So we've actually plugged Israel into the vein of global liquidity and it's really something exciting to see.

[B]

Absolutely. And we're going to get into the thick of the differences between the different stock markets very soon. But first, you do have a very personal relationship, I've been told, with IAI.

[C]

Yes, indeed. So IAI, as you probably know, was formed in 1953. It was a Bedeck aviation company. It was a government owned enterprise focused primarily on providing kind of aviation services and maintenance. About a year later, in 1954, my grandfather Achel Ben Yosef joined the company. He spent 31 years at the company, ultimately retiring in 1985 and as general manager of Tassie Abelit of IAI. And in 1960, about six years after my grandfather joined the company, that was my mother's father, my father joined the company as and ended up being an aeronautic engineer at IAI for about 10 years before he moved to the States.

[B]

That is obviously a very personal and familial story, but IAI is very emotional. I think for a lot of Israelis you have direct connection. Why do you think it of a government owned defense company? How would you kind of think about it in Israeli society first and then afterwards? Maybe it's in the broader defense ecosystem.

[C]

I agree with you. I think IAI for many, many is viewed as one of the most formative companies in Israel's history. Of course it was a commercial business, but as we all know, it played a real role in the kind of military and development of the kind of air force and sourcing of parts and refurbishing. And it was a huge employer in the country, one of the kind of first enterprises that started generating money for the government as well. And today it's by far one of the largest private companies in the country, valued at somewhere between 20 and 25 billion dollars. To give you perspective, the company, as far as we know, currently generated about $870 million of EBITDA in the trailing 12 months ending 2025. So unlike a lot of private companies, IAI is owned 100% by the government. It's the lifeblood in many ways of the defense kind of ecosystem. It's a great source of pride for the country, but it also is a potentially very valuable public entity as well. And I think that's the genesis of kind of the debate that's happened frankly over the last five years. But it does seem to be heating up.

[A]

There's a beautiful story about the company from its historic value. Symbolic Value was co created by Ben Gurion and an American citizen called Al Schwimmer, who had the vision of building that, if you will, sort of pitched it to Ben Gurion in the 50s. And the saying is that Israel dreamt of having an aviation industry when almost had no cars. So there were no cars on the roads in the 50s. It was massive austerity regime. Folks were paying with pay slips like food stamps to get food. But there was a small, tiny group in Israel busy with imagining an 860 million EBITDA ultimately globally sort of bleeding edge industry. And so for better and worse, AI carries this massive symbolic weight in Israeli society.

[B]

It also kind of reminds Nati, I wonder your thoughts as someone who is so embedded in the Israeli tech system today. Kind of reminds us that Israeli tech didn't start with apps and SaaS and all that stuff, right? It started just like your grandfather and deep engineering, national constraints. It's kind of like the startup ecosystem today is very much the second chapter of Israeli tech.

[C]

You could not have said it better. You know, all of the innovation that Israel originally was known for was born out of necessity, right? It was common equipment, it was security software, it was all of the things that kind of came out of both required national service and threat of difficult neighbors. And you're right, you know, we used to joke in the family that, you know, Israel can create a fighter jet and Israel can create all of this stuff at iai, but when it comes to cars, you know, the susit that wasn't a particularly successful endeavor. I think the more complicated it is, the better we do in Israel.

[B]

Yeah, absolutely. I always, I joke when it rains here, we all, you know, we don't know what to do.

[C]

It's funny you say that. I was traveling to Israel a ton throughout the war and people were showing up, you know, sirens with their kids. You know, meetings were never canceled. I was there two weeks ago and it was raining. I had four meetings canceled in one day, more than throughout the entire war.

[B]

Bringing it now why we're talking about the rumors, the reports, what be you. Even the discussion around an IPO is very meaningful. It signals a shift, as you said, from how do we protect this asset? Something that we were very kind of holding close to our chests as Israelis. This is ours, this government owned to how do we help it grow? Then the questions start forming, where do we help it grow? And that's a very different mindset, I think, for a state owned defense company.

[C]

This company is in a unique position. Right? It is by far the most critical company for a national security standpoint. There's a need for capital on the heels of the war. Obviously the economy is doing way better than anybody expected, but still, this would obviously be a tremendous source of capital. Even at 10 or 15% of an issuance, it's $3 billion plus. But ultimately the decisions are not being made by kind of traditional business people the way they are, let's say, at a company like Elbit, which of course is the closest kind of comp to iai, but was formed as a JV with the government, but was a private company from day one. The decisions that have to be made here have to be made by the Ministry of Defense, the Ministry of Finance, the Israel Company Authority. And I think some of the things that they're struggling with in the kind of decision tree around timing and process and what kind of IPO to do and should it be local, should it be global, is that they're kind of wrestling with things like disclosure, things like potential exposure and liability. In what court systems would any litigation take place? You know, we've tried through the proper channels to communicate that first of all, this is an industry and Elbit obviously is a great example where both the companies understand what to disclose and what not to disclose, and that investors in this sector also understand that there are things that may not be disclosed because of the sensitivity around the work that these companies do. And of course, you have Elbit in the States and in the US you have, you know, Lockheed and Raytheon and General Dynamics and Northrop Grumman. There's a ton in Europe as well. You look at companies like BAE and Thales and Leonardo, they all have stakes that are held by the government or sometimes they call them golden shares as you're all familiar with around companies like ll. And you know, we've tried to kind of communicate that the benefits of having top tier global shareholders, having better liquidity, having research coverage in English from analysts that cover the sector, this could both improve the valuation, it could also help the company raise more capital. It can also give them a much more diverse shareholder base from which to raise capital in the future. Really interesting data point that I think is, is hyper relevant. Last week csg, the largest defense IPO ever, Jefferies was one of the lead banks on that transaction. The company raised, if I'm not mistaken, about $4 billion at a valuation of approximately 30 some odd billion dollars. So first of all, very similar size of company, very similar targeted capital raise. That company listed in the Netherlands, I think there were 600 orders from investors around the world. It traded up 30, 40% on day one. That is the type of process that I believe would be best for IAI and for the country. And the one thing I think they're wrestling with the most is that if they only sell to Israeli institutions in the IPO itself, then the default venue for any potential litigation would be Israeli courts where I think they feel much more comfortable operating and that that's a totally fair consideration.

[A]

So not if we put you in the CEO seat, right? Or is this a Tel Aviv first and then see how it goes and then a dual listing strategy. Is this Tel Aviv only? I mean I look at Palantir, they have very, very complex relationships with defense administrations worldwide. As a shareholder, you don't know, you don't get exposure. So if kind of we put you in the hot seat and you have to pitch. What's the strategy here?

[C]

So it's a great question. No matter what, I think being listed on the TASE is the right thing for this company. I think it's great for the country, I think it's great for the market. On the topic of kind of dual listing or not, one of the things that's really interest, there's been a huge rise of the allocation of capital to global small cap and mid cap strategies, meaning strategies that are dedicated to investors that may sit in the us, they may sit in London, but have a global and non US mandate. And Israel is an incredibly attractive market for such investors that are investing globally. So historically when that wasn't the case, a lot of Israeli companies dual listed in order to be able to get investors in the US and investors in, in, in Israel. The challenge of that is that you split liquidity. Right. And you have some liquidity in one market and some in the other.

[A]

Yep.

[C]

What we're starting to uncover, and we've now, you know, completed 13 transactions where the majority of investors were global. I think we talked about this around next vision, by the way, also an Israeli defense tech company. And in that case, 92% of the investors of the $400 million that we raised were global. And they were the top tier names that, that you would be familiar with. I think the government's perspective currently is start in Israel, sell just to the local investors, let's get a cadence of performance, let's raise the capital that we need. Over time we can either kind of issue additional equity. Right. They're only targeting, selling 10 to 15%. We can sell additional equity to global investors and consider next steps. In my personal view, the right thing to do would be to explore whether we can address their concerns. For example, if you have a couple of underwriters such as Jeffries, and the government's view is we're happy to sell to global investors, but we want the venue for any potential litigation to be Israel, we can figure out how to address that. So there are paths to achieve this. And that enables you, I think, to have instead of 9 or 10 large shareholders, 25 or 30 world class shareholders. And I do think that's probably the better path for the country, but they may choose to do that in a two step sequence.

[A]

So I think from that perspective, I think that begs the question of cultural changes. What needs to change in a company like that? I've been in touch with some of the folks on the board over the last few years as they were going irrespective of an ipo Right. Through cultural challenges, the strength of the labor union. Do you see this kind of the IPO specifically starting in Israel as a process by which the company kind of grows into, you know, morphing its DNA in a way? Right. It has to do not just with disclosure about process, but just, you know, basic things like comp structures, compensation and otherwise things that private companies, you know, have it as a second nature.

[C]

Absolutely. And I think that's part of their consideration as well is that, you know, we're going from being a government enterprise to a private enterprise. So you're right in that that's a lot more manageable when you start with people that know the entity well, that support the entity fundamentally, that understand its importance to the country, that will give it a little bit of, quote, latitude as it kind of evolves. There are still things that need to be resolved around a very powerful union around regulatory. I do think that the timing of this will be longer than people expect. I think it's more likely that this is, you know, six months plus out. One thing I should mention, well, around the discussions around the IPO of iai, there's also discussions around the IPO of Rafael. Of course, IAI is further along in its process. IAI actually has bonds that are traded on the Tel Aviv Stock Exchange. As a reminder. Israel is one of the few markets in the world where corporate debt actually trades listed and not otc. One of the many advantages of being listed in Israel is the ability to kind of quickly access debt capital and what is a pretty deep fixed income market. And so IAI actually has a prospectus out already because of the bonds being traded. And so that process will be easier. Rafael does not. And so that's probably six to 12 months behind IAI. But there still are a lot of things that have to take place before IAI can kind of go through this. As far as we know, they've currently kind of selected four local underwriters who started that process about a year ago. But I don't think there's been much progress in their discussions in recent months. So there's still a lot that has to happen. They did identify a new chairman in Silvan Shalom. And so that I think is an indication that they are kind of progressing with putting the steps in place to move this forward.

[B]

So just taking off from Silvan Shalom, a former politician of the foreign minister of Israel, who would be the biggest winners and losers from IAI going public. So, you know, it kind of forces us to ask a hard question. Can we keep IAI something that is very strategically vital to Israel and the Israeli economy? The ethos, as you said, really the narrative of Israel, but also let it behave like a world class global economy. Yonatan talked about like the talents and kind of the cultural differences and so forth that will need to change who wins by IAI going public.

[C]

From my perspective, everyone, you know, this is such a world class organization and it's a world class organization despite being 100% government owned. So the ability to raise 3, 4 billion dollars to use some of that primary capital to bring in potentially, you know, really experienced business leaders, many of whom, especially coming from Israel, will be Honored to run a business like this than to help it evolve into a kind of a world class private enterprise to use that capital to invest in the growth of the business, in the technology and the R and D. And so, you know, again, Looking back at CSG, in my mind, there's no reason that IAI can't be the largest defense IPO ever. They could raise more than $4 billion again if they got the right valuation and so on. I think that that's still within the realm of raising 15 to 20% of they can raise a significant quantum which would give them the ability to do M and A. So I think the State of Israel wins. I think the Tel Aviv Stock Exchange wins. I think investors win. Whether they be just local or global investors, obviously the country from a tax standpoint wins. It gives them the ability to employ more people. So I think the only losers are the competitors. I think it's good for everyone.

[A]

Nati, does Elbit win or lose? That's the next question here.

[C]

It's a good question. I mean Elbit is a remarkable company. I don't know if I was taking a look at it before this call. It's trading around 30 times EBITDA.

[A]

30 times EBITDA peak market cap. I think 20% since the beginning of the year. Actually it's losing on the week's Windex, but I think 20 or 18% since the beginning of the year. So obviously this IAI speculation is doing it. Good question. Is once it's out and the benchmarks are out, or do you think all of those are traded not on a geographical national basis, but the comp is Palantir and CSG or you know, EADS and so on.

[C]

It's a good question. I don't think they're traded on a regional basis. At the end of the day, I think these are both considered to be top tier defense contractors. I think what's interesting about Elbit and one of the reasons I think you get such a premium valuation there is a very interesting trend that's happening now as you're all familiar, especially in the last few weeks around the kind of dialogue between the US and Europe where you're seeing a significant increase in a focus on independence in Europe and on kind of de emphasizing the reliance on the US And Elbit is one of kind of very few tier one, kind of prime that are focused on Europe. Elbit has a disproportionate amount of its revenue coming from Europe and I think that's been, they've been a direct beneficiary of that. And I think that IAI would benefit as well. And so I don't view it as a challenge rabbit. If anything, I think it's just kind of rising tide lifting all boats theory and I think provides global investors yet another world class, you know, defense company to invest in.

[A]

And in the same vein as this is a highly competitive market with potentially high margins because of the business that is, you know, highly IP protected complex systems, what happens to your ability to price up when you're public? I mean, do you think that companies that have significantly higher margin on a calm basis can get, you know, pressured out, you know, in terms of their pricing? Or is it so well hidden in terms of the verticals within the company that it's very hard to deduce? I was following in the last year Rheinmetall out of Germany, 150% up on a 12 trailing month basis. One and a half million shell production capacity per year now serving also NATO of course. And there, there's a big issue in Germany like this is becoming a high margin business. Is this where all the fired Volkswagen and Mercedes mechanics go now that you know, the market is changing? So what happens when you're out there in terms of pricing power? In terms of comp.

[C]

It's an interesting point in the cycle now because clear companies have pricing power. First of all, it depends on competitiveness. If you're ahead of the curve and you're providing a product that's not in any way commoditized and is quite valuable, you know, what is arrow worth to a country? Right? You know, one is, you know, what does the competition look like? Where is their pricing power? I think some of the products that these companies sell are of course products that are, you know, manufactured and sold by others. Some are so unique and differentiated that it's really tough to put a value on them. And it also in this point in the cycle you're seeing so much defense spending, rearming, preparing, because the world's an unpredictable place that these are probably margins that are going to be tough to maintain on a long term basis. But for now it's about as good as it gets. You know, we talked about CSG last year. I think there were three or four other very high profile IPOs in the US all of whom were incredibly well subscribed and priced above the range and traded well. I know that we're on the road this week with the IPO of York Space Systems. It's a space prime that does end to end kind of mission. Solutions across the full space ecosystem. They're raising about $500 million at a $4 billion market capture price on Wednesday this week. And from what I understand from our team, there's a backlog of five or six more of these. So it's about as good a time as it gets for being a defense company. And there's probably at some point going to be some margin pressure. But at this point, you know, I think your pricing power depends on how valuable what you're producing is and how differentiated and ahead of the curve.

[B]

Nati, I'm going to tap into the Nati, the Israeli born Nati here. Is there a good case still to keep this sector largely government owned in Israel?

[C]

I think you have to maintain government ownership and control over these companies. They're so fundamentally critical to national defense. But there are so many ways and mechanisms by which, you know, we've talked about golden chairs, we've talked about, you know, super voting. There's all kinds of other things, you know, mechanisms you can do, you, you can raise the capital that you need at valuations that you want, you continue to grow the business here. They're talking about a 15% ish issuance. But absolutely, I think that having IAI and potentially Rafael remain within government control is advised in Israel, more so than probably anywhere else in the world. But IAI and Rafael probably should remain as much as possible controlled by the government, in my view.

[B]

Nati Guinol, thank you so much for joining us this morning. This snowy morning in New York, sunny afternoon here in Tel Aviv. Thank you for joining us.

[C]

An honor to be here and especially to talk about such an important Israeli company and one that's also so important to the family. Really appreciate you having me back and thanks for all the great work that you all do. The podcast is fantastic.

[A]

Boy, this was a tour de force by Nati. It was great to have Nati before to kind of give us a macro view, but this one was obviously close and near and dear to his heart part. What I take away mainly are two things. One, you know, I think of, albeit I think of maybe this is the, you know, there was a hint of that in what he said. Is this peak defense tech? Is this the play that basically tells everybody else it doesn't get better than this in terms of margin and pricing capacity? Sort of one thing to remember. The second was how complex it is to take a company that was, you know, government owned for 75 years, crown jewel of the industry, like heavy symbolic weight that delayed reforms in Israel for a While and and now is kind of at the forefront to take it public. It's like a different DNA IAI has.

[B]

Also culturally in Israel, you know it's a kind of synonymous with slow and outdated. But that's kind of like a just a bad rap. And also a tendency to assume that government owned means slow and outdated. But IAI also according to Nati's data, but in general really competes and wins against kind of the private global defense giant. And the question is as he put it and which is super interesting, it's not whether it's capable but whether it's ownership structure. Is it optimized for the speed and capital efficiency that is needed. It's also kind of striking that IAI is one of Israel's biggest tech companies by revenue and headcount. It's not something that comes up often. It's like a hidden giant among Israeli tech ecosystem doesn't fit that startup narrative. It's not as sexy as you would think. But that's kind of like the classic Israeli story was built out of necessity and. And it's really competing on the world stage.

[A]

Yeah. As he was putting out the number there, I think it was 840 billion EBITDA this year speculated because nobody knows the real numbers until the reports go out. When you sort of divide that by the amount of employees compared to digital tech, it's not that attractive. And that's how you see the multiples. Right. That's why he was saying LBIT is trading at 30 times multiple. You don't get that in defense tech. And maybe again that alludes to how crazy and hot the sector is right now. And maybe that's the right timing for I to leverage that. Naati was also mentioning this may take six months. This is not easy to do. It's still complex. And he compared it to Rafael who is even slower and earlier in its prep. I think another number to take away from Nati is a speculation. But it seems about right that the capital to be raised would be about 15%. That is at the tail end of the IPO. Should it happen, mature and everything works successfully, the Israeli government would still retain 85% of the shares in the company and possibly more in the voting shares of the company company. And so that gives us a bit of a sense of where this is going before we conclude. You know, we talk numbers at the beginning of the episode and we always conclude with the words I was searching for interesting words of the week. This was the Davos week. A lot of words in Davos but two sources came out this time and I decided to bring both of them. One is short and sweet and positive. The other is very profound. The short and sweet as it relates to. Also what we spoke on the big shorts is Elon's tweet, tweet about lemonade. And here's how it goes. Insurance is half price when Tesla self driving is activated because it increases safety so much. That was a retweet on a lemonade Tweet, I think. 31 million views within like 24 hours. And obviously the stock responded as we discussed in the first part of the episode. And so that's to me, words of the week on the positive side, on the other side side is the person that I personally admire for showing the world what modern formative leadership is. And that's Chancellor Mertz of Germany. Last week in Davos, he spoke openly about Europe's failure to compete. This has been a sign for his leadership since he became chancellor. He says Germany and Europe have wasted incredible potential. We have become the world's champion of over regulation. Zero growth. Pay attention to Germany. I think it's a founding president of this Republic. Markets love it. 18% DAX increase increase 2025 and defense and tech investors also. We spoke about Rheinmetall with Nati. That's just one example. I think Germany is very interwoven into the Israeli economy. And so we all want to root out for Germany. We want Germany to win. And I think Chancellor Mertz is definitely the right person. So it seems to do that.

[B]

Absolutely. It strikes me how pragmatic he's being when you look at other European leaders as well. He's calling out over regulation and he's talking about, you know, zero growth isn't just critique. It's a signal kind of to markets and investors that Germany is serious. And I know you talk a lot about radical reform and so forth. It's a useful reminder for Israel that, you know, we used to be like that. The countries that tackle these structural issues head on are going to be the ones that going to create opportunities for tech defense investment. So the numbers are there. They're very impressive, as you said. But the biggest story I think is about the leadership. Clear, decisive leadership.

[A]

Yeah. And so with that, we conclude that's the show for today. Thanks for tuning in to ARC Media's what's yous Number. We hope you found it interesting and if you did, be sure to like subscribe, rate review and you know the drill. Most importantly, share it with others who you think will find it interesting. If you want to make suggestions or share feedback, reach out to us at what'syournumberarkmedia.org.

[B]

What's your number? Is an ARC Media podcast. Arc Media's Executive producer is Adam James Levin Aretti. Our production manager is Brittany Cohen. Sound and video editing is by Liquid Audio, and our theme music is by Midnight Generation. I am Yael Wismilavi.

[A]

I'm Yonatan Adiri. See you back here next week. This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.