A day after the deal collapse: What is happening to Norstar and G City shares

G City shares fell yesterday by about 4%, Norstar shares reacted with a 5.2% drop, and Ari Real Estate, owned by Tzahi Abu, rose by 3.3% — this followed the collapse of the deal between Chaim Katzman and Tzahi Abu for the purchase of G City shares. This morning, the trend is beginning to reverse.

The declines in G City and Norstar shares stem from the fact that the collapse of talks erases expectations for external capital injection, a control arrangement, or rapid value creation, and returns investor concerns to the group's high leverage level of 75%.

On the other hand, shares of Abu's Ari Real Estate showed a positive market reaction to the fact that the company will not be dragged into an expensive struggle for control against Katzman. This preserves its liquidity and resources for core operations, or as Abu stated in an interview yesterday, makes the company more available for the next deal.

G City aims to bring in a new partner by March, when it will require an injection of 700 million shekels. The major question is how investors will price these recent events and what the future trajectory for the stock will be.

As for this morning's trading: G City opened with a 0.9% rise (after yesterday's 4.1% fall), but half an hour into the session, it stagnated and shifted to a 0.3% decline. Norstar opened with a 1.5% rise (yesterday it plummeted by 5.2%), but gains moderated within the first half-hour. Following yesterday's rise, Ari Real Estate is down by 0.6%.

The real estate index fell in July by 3.1%, and the construction index by nearly 5%. Both indices have been declining since the beginning of the year against the backdrop of an economic slowdown and interest rates that, despite recent cuts, remain high. Naturally, the war has also had a significant impact.