Focus on: Resilience Under Fire: Israeli Tech Companies Navigate the New Washington

From a transformative SEC regulatory reset and landmark insider-reporting rules to the shadow of ongoing regional conflict,

Israeli issuers face a pivotal inflection point in the U.S. capital markets.

There is a particular kind of resilience that defines the Israeli technology sector. Call it the startup nation spirit, or simply the compulsion to keep building – whatever its source, the Israeli tech industry has spent the past two and a half years demonstrating it in conditions no boardroom simulation could replicate. Missiles, reserve call-ups, credit downgrades, geopolitical fracture lines, and an almost perpetual state of national emergency: these are the background conditions against which Israeli companies listed on U.S. exchanges – and their lawyers, advisors, and investors – have been operating.

And yet, by almost any headline metric, the story is one of extraordinary performance. The Tel Aviv 35 Index hit record levels in 2025. Israeli tech exits surged to approximately $59 billion in new M&A and IPO activity – a staggering 340 percent increase over 2024 – anchored by Google’s $32 billion acquisition of Wiz, the largest cybersecurity deal in history, and Palo Alto Networks’ $25 billion purchase of CyberArk. Israel’s startup ecosystem raised $15.6 billion in private capital through December 2025. The Tel Aviv Stock Exchange shifted to Monday-through-Friday trading in January 2026, aligning itself with global markets in both the literal and figurative sense.

But behind these numbers lies a more complex picture – one that the clients who call our firm’s U.S. Capital Markets practice are acutely aware of. The regulatory landscape in Washington has undergone its most consequential reset in years, and several of the changes carry particular weight for Israeli issuers. The question of foreign private issuer status – long a cornerstone of the cost-benefit calculation for Israeli companies choosing to list in the United States – is under active review by the Securities and Exchange Commission for the first time in more than two decades. New insider-reporting obligations that have never before applied to FPI directors and officers took effect in March 2026. The SEC’s enforcement posture has shifted dramatically in the post-Gensler era. And throughout all of it, our clients are still navigating disclosures that need to account honestly for what it means to operate a technology company headquartered in Tel Aviv when Iran and Israel fought a twelve-day war in June 2025 – and when that conflict escalated dramatically again in late February 2026.

What follows is an honest assessment of what is on the agenda for Israeli issuers in the U.S. capital markets today.

The FPI Status Question: A Ticking Clock for Israeli Issuers

On June 4, 2025, the SEC issued a concept release soliciting public comment on the definition of “foreign private issuer” – the regulatory classification that has enabled Israeli companies to access U.S. public markets under a framework of meaningful regulatory accommodations since the 1980s. The release represented the first time the Commission had undertaken a broad review of FPI eligibility in more than two decades, and the data it presented made clear why Israel found itself at the center of the conversation.

FPI status matters enormously. Companies that qualify may prepare financial statements under IFRS or home-country GAAP rather than U.S. GAAP; they are not required to file quarterly reports on Form 10-Q; they are exempt from U.S. proxy solicitation rules; they have extended deadlines for annual reports; and – until very recently – their insiders were not required to file Section 16 reports. These accommodations were premised on the historical assumption that most FPIs would be traded in their home markets as well as in the United States, and would therefore be subject to “meaningful disclosure requirements” in their home jurisdictions.

The SEC’s own data reveals how much the FPI population has changed. Approximately 55% of all FPIs now appear to trade exclusively in the United States. Of the FPIs that are U.S.-exclusive, companies headquartered in China/Hong Kong and Israel together account for more than half of the total. Israel is the second-largest jurisdiction of FPI headquarters among U.S.-exclusive issuers, trailing only mainland China. The concept release raised pointed questions about whether companies in this category – those that benefit from FPI accommodations but are not subject to meaningful foreign market regulation because they do not trade abroad – should continue to receive them.

For Israeli companies, the proposed approaches in the concept release vary significantly in their potential impact. A foreign trading volume requirement, for example, could be particularly disruptive: SEC data indicates that a 1% minimum foreign trading volume threshold would exclude over 60% of Israeli-incorporated FPIs. A major foreign exchange listing requirement raises similar concerns for companies that have chosen to list only in New York. On the other hand, a mutual recognition framework – akin to the Multi-Jurisdictional Disclosure System long in place for Canadian issuers – could potentially offer Israeli companies an enhanced pathway, given the deep structural alignment between Israeli securities law and its U.S. counterpart.

The Israel Securities Authority responded to the concept release with a substantive letter to the SEC, noting that Israeli FPIs have historically been incorporated and headquartered in Israel, are subject to Israel’s Companies Law and robust corporate governance requirements, and are already supervised by a professional, independent regulator. The ISA proposed the establishment of a dedicated task force with the SEC to explore mutual recognition as a formal framework. It remains to be seen how the current SEC leadership under Chairman Atkins – whose deregulatory mandate is generally favorable to reducing compliance burdens – will proceed. The concept release has not yet resulted in a proposed rule, and the comment period closed in September 2025. But the direction of travel is clear, and any Israeli company that has not thought carefully about whether its listing strategy and trading footprint would survive a revised FPI definition is not paying sufficient attention.

Our advice to clients: the time to plan is now. The dual-listing structure is no longer merely a legacy consideration – it may become a legal necessity.

Section 16 Comes to FPIs: A Governance Sea Change

While the FPI definition review remains at the concept stage, one reform moved from concept to law with striking speed. Tucked into the National Defense Authorization Act for Fiscal Year 2026, signed on December 18, 2025, were the provisions of the Holding Foreign Insiders Accountable Act. The HFIAA amends Section 16(a) of the Exchange Act to extend insider beneficial ownership reporting obligations to directors and officers of foreign private issuers – obligations from which those individuals had been entirely exempt since the modern FPI framework was established.

The original compliance deadline was March 18, 2026, ninety days from enactment. On or before that date, every officer and director of an FPI registered with the SEC must file an initial Form 3 disclosing their beneficial ownership of the company’s securities – even if they hold no shares. Going forward, Form 4 filings will be required within two business days of any transaction. Annual Form 5 filings will also apply. The SEC adopted implementing rules on February 27, 2026.

This is not a minor compliance addition. For Israeli companies – this represents a structural governance change. practical coordination challenges are considerable: multiple directors sitting on Israeli technology company boards may serve on several boards of public companies simultaneously, meaning the HFIAA affects not individual companies in isolation but the entire infrastructure of the Israeli tech governance ecosystem.

An important and welcome development emerged on March 13, 2026 – one that reflects both the severity of the ongoing security situation and the responsiveness of the SEC staff when presented with a well-reasoned case. Our U.S. Capital Markets practice identified, shortly after the Israel-Iran war began,  that the original March 18, 2026 compliance deadline created a genuine hardship problem for Israeli FPI directors and officers whose ability to comply had been materially disrupted by the Iran War. We raised this concern directly with our friends at Skadden, Arps, Slate, Meagher & Flom LLP, and advocated for an approach to the SEC seeking possible relief.

That approach bore fruit. On March 13, 2026, the SEC’s Division of Corporation Finance issued a no-action letter – obtained by Skadden on behalf of one of its clients – granting directors and officers of FPIs organized and headquartered in Israel, or in any other jurisdiction in the geographical region directly affected by the Iran War, until April 20, 2026 to comply with the new Section 16(a) reporting requirements, provided their ability to meet the original filing deadline was materially affected by the direct effects of the conflict. The extension represents a meaningful and well-deserved relief for a community of issuers managing compliance obligations in extraordinary circumstances, and the result is a credit to the coordination across the Israeli capital markets bar that made the request possible.

All Israeli FPI directors and officers who benefit from this extension should be under no illusion that the reprieve changes the underlying obligation. The April 20 deadline is firm, and the substantive compliance work – Form ID applications, EDGAR access credentials, pre-clearance procedures, and board education – must be completed by that date. Companies that have not already made substantial progress on this work should treat it as their most urgent near-term corporate governance priority.

The SEC Under Atkins: Deregulation with Caveats

The change in SEC leadership following the Trump administration’s return to Washington has produced a meaningfully different regulatory environment.

For Israeli issuers, the Atkins SEC presents a mixed picture. On the positive side, the SEC’s Spring 2025 Regulatory Flex Agenda signaled consideration of amendments to expand accommodations for emerging growth companies and to rationalize filer categories to reduce compliance burdens – developments that would generally benefit smaller and mid-cap Israeli tech issuers. The overall rate of enforcement actions dropped significantly after the change in administration, and the SEC has walked back several Gensler-era priorities, including certain climate disclosure mandates that had imposed significant costs on international registrants with complex global operations.

At the same time, the Atkins SEC has signaled that enforcement in its priority areas will be vigorous. Insider trading, accounting fraud, and material misrepresentation cases are described as the new Commission’s primary focus. For Israeli companies – which face the particular challenge of operating in a country where geopolitical developments can create sudden, material information asymmetries – the combination of heightened insider trading scrutiny and the new Section 16 reporting regime creates a compliance environment that requires active management. The SEC’s Cyber and Emerging Technologies Unit, successor to the Crypto Assets and Cyber Unit, has also signaled active pursuit of cases involving misrepresentation of artificial intelligence capabilities – a risk that is particularly relevant for Israeli tech companies as AI claims have become central to investor communications.

The conversation about quarterly reporting has also reemerged. President Trump has urged the SEC to revisit the mandatory quarterly reporting cycle, and Chairman Atkins has described this as among his early priorities. For FPIs – who are already not subject to quarterly reporting – the potential move toward semi-annual reporting for domestic issuers would narrow one of the most significant advantages that FPI status currently confers. Israeli companies should track this development carefully, as it could influence the cost-benefit analysis of maintaining versus surrendering FPI status.

War, Disclosure, and the Impossible Risk Factor

No honest account of the situation facing Israeli companies listed in the United States can avoid addressing the security environment. The October 7, 2023 Hamas attack and the subsequent multi-front conflict – in Gaza, Lebanon, and ultimately against Iran itself – created a disclosure challenge unlike anything Israeli companies had previously encountered. How does a publicly traded company headquartered in Tel Aviv accurately, completely, and non-misleadingly describe its operational and financial risk environment when that environment includes the possibility of ballistic missiles striking office parks?

The twelve-day Israel-Iran conflict of June 2025 – the most direct confrontation between the two countries in history, culminating in joint U.S.-Israeli strikes on Iranian nuclear and military facilities and a U.S.-brokered ceasefire on June 24 – demonstrated both the resilience of the Israeli tech sector and the limits of that resilience. Israel declared a state of maximum alert. Schools and public gatherings were shut down. Ben-Gurion Airport suspended commercial flights. Over 100,000 Israelis stranded abroad during the fighting required repatriation. The damage from Iranian missile strikes exceeded one billion dollars in claimed property losses. Twenty-nine Israelis were killed.

The situation escalated again in late February and early March 2026, when a joint U.S.-Israeli operation targeted Iranian leadership, killing Supreme Leader Ali Khamenei and triggering an ongoing, wider regional conflict that at the time of writing continues to unfold. Iranian forces have widened their strike campaign across Gulf states and restricted traffic through the Strait of Hormuz, driving oil prices above $100 per barrel and prompting global energy market volatility. For Israeli companies with operations, employees, and infrastructure in Israel, this is not an abstract geopolitical risk – it is a current operational reality.

The SEC requires public companies – including FPIs – to disclose material risks to their businesses. The challenge for Israeli issuers is calibrating those disclosures in a way that is honest without being so alarming that it triggers investor flight, and specific without being so detailed that it becomes impossible to maintain accuracy in real time. Companies have wrestled with how to describe government-mandated reserve call-ups affecting a material percentage of their technical workforce, how to account for potential damage to physical infrastructure, and how to characterize the indirect effects of a prolonged security emergency on hiring, retention, and the ability to attract international talent.

The 2025 experience provided some reassurance: the tech sector’s fundamental resilience held. High-tech exports continue to account for nearly 20% of Israeli GDP and approximately 60% of total exports. Investment in Israeli tech startups remained robust, with foreign funds – predominantly American – accounting for 60% of total capital deployed. The TASE performed strongly throughout the period. But the disclosure obligation is not satisfied by resilience after the fact; it requires honest prospective disclosure of the risks that materialized. Companies that have not revisited their risk factors in light of the current conflict should do so immediately.

There is also a reputational and ESG dimension that has grown increasingly difficult to manage. Israeli companies face heightened scrutiny from international institutional investors, some of whom have adopted policies that effectively preclude investment in companies associated with Israeli defense or security technology. The constellation of boycott campaigns, UN special rapporteur reports naming corporate actors with Israeli connections, and European regulatory pressure creates a compliance and investor relations environment that requires active management by boards and executive teams – and careful attention in SEC filings to the potential materiality of these issues.

M&A Exits, IPO Revival, and the Incorporation Question

Against this backdrop, the exit environment for Israeli tech companies tells a counterintuitive story. Total Israeli tech exits in 2025 reached approximately $59 billion in new transactions – a 340% surge year-over-year – with Google’s acquisition of Wiz and Palo Alto Networks’ purchase of CyberArk accounting for the headline figures. The IPO window also reopened meaningfully, with eToro completing a $700 million Nasdaq listing and Via Transportation listing on the NYSE, signaling renewed public market appetite for Israeli-founded issuers. The number of Israeli companies publicly listed on U.S. exchanges stands at approximately 135, making Israel the fourth-largest national source of Nasdaq-listed companies worldwide, after the United States, Canada, and China.

But the exit data masks structural tensions that our practice encounters constantly. The average acquisition size in 2025, excluding the mega-deals, fell approximately 40% to around $160 million. The number of startup funding rounds hit its lowest level in a decade. A growing bifurcation between well-capitalized companies in AI and cybersecurity – which command premium valuations and attract the world’s leading strategic buyers – and the long tail of smaller companies facing funding pressure and distressed conditions is evident in the data and in the flow of client calls we receive.

Perhaps the most consequential structural trend for the Israeli tech ecosystem – and one that carries direct regulatory implications – is the sharp increase in Israeli founders incorporating their companies in the United States rather than Israel. According to data presented at a late-2025 industry conference, more than 80% of Israeli-founded companies are now choosing to register in the United States, compared with approximately 20% in 2022. This trend is driven by a combination of factors: perceived tax efficiency, ease of fundraising from U.S. venture investors, and – particularly since 2023 – concerns about governance instability in Israel and the implications of the ongoing security emergency for business formation.

The FPI implications of this trend are significant. A company incorporated in Delaware or another U.S. state, even if predominantly operated from Tel Aviv, is a domestic issuer under U.S. securities law – not an FPI – and loses all the accommodations discussed above. For companies that have already made this choice, or are contemplating it, the FPI analysis now needs to be part of the planning conversation at the very earliest stage of company formation and capital raise structuring. The momentum toward U.S. incorporation may be commercially rational for individual companies, but at the ecosystem level it creates a regulatory ratchet that reduces the structural advantages the Israeli tech sector has historically enjoyed in U.S. capital markets.

Looking Ahead: What Israeli Issuers Must Do Now

The confluence of factors we have described – the FPI status review, the Section 16 compliance deadline, the deregulatory but enforcement-focused Atkins SEC, the ongoing and escalating security situation, and the structural shift in incorporation patterns – creates a demanding agenda for Israeli companies in the U.S. capital markets in 2026 and beyond. We offer the following observations for boards and management teams navigating this environment.

FPI status planning should be treated as a board-level governance issue, not a periodic legal formality. The concept release process may lead to proposed rules within the next 12 to 24 months. Companies that are currently listed exclusively in the United States should model the impact of a trading volume or exchange listing requirement on their FPI status, and evaluate whether voluntary dual-listing on the TASE – or enhanced engagement with Israeli institutional investors to increase home-country trading volume – is warranted.

Section 16 compliance requires immediate action where it has not yet been addressed. Every officer and director of every FPI registered with the SEC should already have EDGAR filing credentials, pre-clearance procedures should be in place, and boards should have received substantive education. The ISA’s parallel role in coordinating Israeli FPI compliance with the new requirements should be monitored closely.

Risk factor disclosure is not a static document. The security situation in the region is evolving in real time, and the materiality analysis that underpinned a company’s Form 20-F risk factors filed in early 2025 may be inadequate in light of subsequent developments. Companies should treat risk factor review as a continuous process, not an annual exercise. The obligation to provide current, accurate, non-misleading disclosure does not pause between filing periods.

The AI disclosure challenge deserves specific attention. Israeli companies are among the most active developers and deployers of artificial intelligence technologies. The SEC’s Cyber and Emerging Technologies Unit has explicitly flagged “AI washing” – the misrepresentation of AI capabilities in investor communications – as an enforcement priority. In a market environment where AI claims command premium valuations, the temptation to amplify capability narratives is understandable. The enforcement consequences of doing so inaccurately are severe.

Finally, the decision about where to incorporate deserves serious legal and strategic consideration at the earliest possible moment in a company’s life. The trend toward U.S. incorporation among Israeli founders has real commercial logic, but it carries legal consequences – for regulatory classification, for FPI status, and for the governance framework applicable to the company – that need to be fully understood before the decision is made. There is no universal right answer; there is only an informed one.

 

The Israeli technology sector has always operated under pressure. What is different now is the complexity of the regulatory and geopolitical environment bearing down simultaneously on companies that are, in many cases, also managing extraordinary commercial opportunities. The clients we work with are resilient – the question for 2026 is whether their legal and compliance infrastructure is equally so.

 

SHIBOLET & CO.

High-Tech Department | U.S. Capital Markets

Representing Israeli companies listed on U.S. exchanges and dually listed on the TASE