BrokerDealer.com blog update courtesy of extract from Jan 2 WSJ story by Telis Demos
Wall Street is dealing with new challenges in one of its bedrock businesses, taking young companies public, as more startups choose to stay private longer.
A number of Internet, software and consumer companies are raising huge sums in private deals that enable them to postpone initial public offerings for years, if not indefinitely. Moreover, they often negotiate these private placements directly with investors, bypassing banks.
Initial stock sales are still thriving, despite the big private companies that have held out on an IPO. This past year was the biggest for U.S.-listed IPOs since the dot-com peak in 2000.
But the trend of companies staying private could present longer-term problems for banks. If companies delay or avoid going public, it could threaten the fees and other relationships—with investors, hot young companies and wealthy executives—that banks get from working on IPOs.
Some Wall Street firms are responding by beefing up their teams that work on the private deals, which also gives the firms another chance to build links with startups that may do an IPO later. The private deals could also generate a new stream of fees before the eventual IPO windfall.
“It’s obvious why banks are ramping up for more private offerings,” said David Erickson, a former banker who is now an operating partner at venture-capital firm Bessemer Venture Partners. But because company executives “have already met a lot of public investors by that time, the pitch for bankers is likely more challenging,” he said.
For the full WSJ story, please click here.
Brokerdealer.com Blog update courtesy of Investment News.
FINRA, Financial Industry Regulatory Authority, fined 10 banks on Thursday for total of $43.5 million for promising positive analyst coverage after initial public offering.
Citigroup Inc. and Goldman Sachs Group Inc. were among 10 banks fined for failing to shield analysts from pressure to promote stocks a decade after a U.S. crackdown sought to end Wall Street conflicts of interest.
The investment banks promised favorable research to Toys “R” Us Inc.
and its private-equity owners in 2010 to win roles in its initial public offering, the Financial Industry Regulatory Authority said Thursday in a statement. The regulator fined the firms a total of $43.5 million, faulting them for “implicitly or explicitly” making promises that their analysts would give positive coverage. Six of the 10 firms didn’t have adequate supervisory procedures to prevent the practice.
Citigroup, Goldman Sachs, Credit Suisse Group AG, Barclays Plc and JPMorgan Chase & Co. were fined $5 million each. Deutsche Bank AG, Bank of America Corp., Morgan Stanley and Wells Fargo & Co. will pay $4 million. Needham & Co. will pay $2.5 million. The firms didn’t admit or deny wrongdoing, according to FINRA.
“The firms’ rush to assure the issuer and its sponsors that research was in sync with the pitch being made by their investment bankers caused them to overstep the prohibitions against analyst solicitation and the promise of favorable research,” Brad Bennett, FINRA’s chief of enforcement, said in the statement.
FINRA said Thursday that Toys “R” Us and its owners demanded that analysts and bankers agree on valuation. For example, the owners told Barclays that they were interviewing analysts “after having been burned” on other deals in which they learned too late about analysts’ negative sentiments, according to FINRA.
Brokerdealer.com offers many databases full of brokerdealers who choose to abide by the rules of FINRA and you can find them here.
For the entire article from Investment News, click here.