Investment Wanking

I've recently landed at a new bank across the street. I'll tell you more once I've settled in a little. Looks like we're back on!

Due to the bank recently changing its IT policy, I have been unable to make any posts for the last few months. I'm currently working on a solution that doesn't involve getting home at 5am and then logging on, but you'll have to bear with me.

Thanks,

IW

I don't want to blow my own trumpet, but however the press spin it, the Google IPO failed to meet its number one objective: To maximise the value for existing Google shareholders.

The shares rose 18% in the first hour. That tells us that the price of the IPO was too low. Which tells us either the Investment Banks screwed up, which is pretty unlikely given the size of the deal and the number of banks, or that the mechanics of the Dutch auction process are flawed.

Google Up in Market Debut After Bumpy IPO

I am getting very accustomed to flying in seat 1A on aeroplanes. It's the front window seat, and is usually seperated from the next seat 1C, as 1B is usually too narrow for someone to sit down in. It has more legroom and a groovy swing-out-from-the-arm table.

Still, I can't believe the Firm pays up to 10x the price of an economy ticket.

Thanks to cutehinano for this link:

http://www.pandagon.net/mtarchives/003123.html

Taken from Terror in the Skies, Again?

With the recent interest in IPOs, in part due to the high-anticipated Google Initial Public Offering, I just thought I would correct some of the insights into Investment Banks.

1) We do not make fees of 7% on IPOs any more. Sure, that may have happened in 1999, but today fees are around 2 - 4%.

2) We do price the offering in order to give institutional clients a first day gain. We price it where the market can support it. If we were to overprice a stock, and it bombs in the first day, people lose confidence in both the bank and the stock.

So you’ve managed to convince your client (or the more likely scenario, the client approached you for advice) to sell one of its subsidiaries. What do you do? Well, as an investment bank, you have to earn your 60 basis points (or 0.6%, which, in the case of a $1.0bn sale is worth $6.0m) and what typically happens is that you fabricate work that you have to do in order to justify the expenses and fees you will claim.

We’re trying to sell a public company. That means it is listed on a stock exchange, and shares can be freely bought and sold. It also means that it has regulatory requirements to provide certain information. At the bare minimum a Company will have to publish an annual report and usually interim reports (quarterly or semi-annually).

So our public company A, has public filings available on the internet. It has several research brokers who follow the company and publish research it. These guys are usually part of large bank and make money by giving their opinions on the future of companies and publishing research notes for other people to see. If they like the information, they could use that particular bank to execute the transaction. I don’t really understand it.

But sufficed to say, there is ample information on the Company in the public domain. However, we have to write an Information Memorandum (Info Memo or IM) in order to justify our fees. It’s bloody stupid, and basically cutting and pasting sections from publicly available sources. It is basically a 50-100 page guide to the company, it’s business, the market and the proposed transaction. A banker’s sales pamphlet. And I’m stuck writing the 23rd revision right now.