158 THE US-ISRAEL | Legal Review 2025/26 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 US-Israeli strikes on Iranian nuclear and military facilities and a US-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 US-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. Hightech 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-overyear - 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 US 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 wellcapitalized companies in AI and cybersecurity - which command premium valuations and attract the world’s
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