The state cannot decide how much to disclose to investors, and the IAI IPO is in danger

A new deadlock in the Israel Aerospace Industries (IAI) IPO process could lead to the opposite result of what the state is aiming for. Instead of turning IAI into a public company whose shares are traded on the stock exchange in three months, it could cease to be even a reporting corporation.

Sources involved in the state-owned company's IPO warn that if the state does not resolve the issue of confidentiality regarding sensitive security information about IAI's activities and the issue of compensatory disclosure it is required to provide to investors by December 1, the Securities Authority will find it difficult to approve a new bond issuance. This means that on that date, the company will be forced to finally repay the balance of its Series D bonds, worth 154 million shekels, and will not be able to continue operating as a reporting corporation.

This is one of the main barriers on the way to the IAI IPO, and according to sources involved in the matter, 'all relevant parties are currently trying to solve the mess and are racing against the clock.' This comes as the Securities Authority, the Ministry of Justice, the Government Companies Authority, and the defense establishment have been discussing in recent days finding an agreed-upon arrangement that will balance the protection of the security secrets of one of the most sensitive companies in Israel with the obligation to disclose to investors material information about its activities.

The root of the problem lies in an arrangement that has accompanied IAI for almost two decades. In 2007, it became a reporting corporation following a public bond issuance, and subsequently, it was granted an exemption from disclosing information whose exposure could harm state security. The exemption from reporting obligations applies to significant parts of its production and development activities, which are considered classified and are under the tight supervision and disclosure restrictions of the Director of Security of the Defense Establishment (MALMAB).

The preparations for the IAI IPO required regulators to reopen the confidentiality issue and define what information could be hidden from the public despite the IPO and what the company would be required to disclose instead. According to a senior source, 'the confidentiality mechanism does not distinguish between trading in bonds and trading in shares. In terms of disclosure obligations, it is impossible to set one standard for a company when it issues shares and continue for a long time with another standard just because the public holds its bonds.'

In October 2025, the final maturity date of the Series D bonds was postponed once again, from December 1, 2025, to December 1, 2026. IAI clarified in its reports that the move was intended to preserve its legal status as a reporting corporation. Thus, a small bond balance has become its umbilical cord to the capital market in recent years, with regulatory bodies now warning that in three months it will no longer be able to follow the same practice.

Israel Aerospace Industries chairman Boaz Levy said in response: 'The company, in coordination with the Ministry of Defense and the Government Companies Authority, is moving towards an IPO and in the coming months a great effort will be made to summarize all the issues required to obtain permits on the subject. The Securities Authority is involved in the process and right now we are all in its final stretch towards the discussions on the issue with the Ministry of Justice.'