IPOs

  • 17 Jun 2013 at 6:06 PM

AIG Turns Lemons Into Potentially Lucrative IPO

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Normally, late payments and delayed closing dates are bad news for a seller. But the systemically-important AIG’s on a winning streak lately and isn’t going to led the tardiness of a Chinese consortium get it down. Read more »

Let Me Introduce You To: One Financial Corporation

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So here’s a story about a Canadian asset manager and I don’t know what to do with it so I’m pretty much just going to tell you the story, and at the end there’ll be a quiz, and the choices on the quiz will be like:

  • Is there something a little weird about this company? or
  • Is this just, like, how things are done in Canada? or
  • What?

I don’t know the answer but maybe you do? Mostly I just love the story so you ought to hear it and then you can decide.

The company is called One Financial Corp. and it markets mutual funds in the “All-Weather Profit Family.” These are advertised as “Canada’s first and only family of long/short mutual funds and wrap portfolios,” designed to “bring[] benefits of hedge funds to the masses” by being long-short and trading derivatives and stuff.1

One thing to know about One Financial is that it fired 70% of its workforce over the weekend and Jeffrey O’Brien, the CEO and founder, “said he was threatened” by some of them. Also he’s looking to hire some salespeople who don’t suck like the old ones did.2 Also there’s some debate as to whether those fired people were fired (a) last Friday or (b) on Monday when they showed up and the doors were locked.3

All bad signs! But that’s not the story, that’s just like some stuff that happened. The amazing story is that, in parallel with firing all its staff, this company is doing an IP’O, which is like an IPO only the P’ stands for “private” rather than “public,” because this is an initial private offering, and it is a pile of amazing. To me. Maybe not to you? Maybe you see this sort of stuff all the time?

Here are some things I enjoyed about One Financial’s initial private offering: Read more »

  • 29 May 2013 at 1:49 PM

Infinite Loop Of Facebook IPO Stories Caused By Actual Infinite Loop During Facebook IPO

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Remember when Facebook IPOed last May and it was a mess? Today the SEC released its amusing order fining Nasdaq $10 million for the mess and explaining what happened. Some computers were having a stressful day at work and so they decided to give up and hide out in the nap room, is the gist of it. I feel like I’d get along with those computers.

What started the mess is that Nasdaq opens the trading of a newly IPO’ed stock with an opening cross where it compiles quotes for a while and then crosses them in one big opening cross before continuous trading starts. And it uses the following process to do the opening cross:

  • 1 Get a bunch of orders over a ~20 minute period before trading starts
  • 2 Use a program called the IPO Cross Application to calculate the clearing price and shares crossed based on those orders, which takes a few milliseconds
  • 3 Check if any of the orders were cancelled during those milliseconds
  • 4 If they were, delete those orders and Goto 2

Did you spot the problem?1 Nasdaq’s systems engineers did not, even after the IPO Cross Application had been running on an infinite loop for twenty minutes. The SEC caught it, though, reading their order, I was worried that they’d fallen prey to it as well: Read more »

  • 08 May 2013 at 4:55 PM

Dan Loeb Is Having A Pretty Okay Year

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These are frothy, giddy times at Third Point. Read more »

  • 02 Apr 2013 at 1:59 PM

M&A Bankers Developing Serious Jealousy Of IPO Guys

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Investors are game for a shopping spree. Corporate executives are less so. In more ways than one. Read more »

Supercharged IPOs: Like Regular IPOs, But Slower

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Lynnley Browning has an interesting article in DealBook about “supercharged IPOs” today. The gist is that some private equity portfolio companies go public, but keep in place agreements requiring them to pay over 85% of certain tax benefits that they receive to their former IPO owners. This, or so the argument goes, is both unfairsies – why do private equity firms get that money rather than the current shareholders? – and also, y’know, opaque secretive financial engineering etc. Viz.:

Now, buyout specialists are increasingly collecting continuing payouts from their former portfolio companies. The strategy, known as an income tax receivable agreement, has been quietly employed in dozens of recent offerings backed by private equity …

While relatively rare, the strategy, referred to as a supercharged I.P.O., has proved to be controversial. To some tax experts, the technique amounts to financial engineering, depriving the companies of cash. Berry Plastics, for example, has to make payments to its one-time private equity owners, Apollo Global Management and Graham Partners, through 2016.

“It drains money out of the company that could be used for purposes that benefit all the shareholders,” said Robert Willens, a corporate tax and accounting expert in New York who coined the term “supercharged I.P.O.” …

Another potential issue is that sophisticated investors do not necessarily understand the deals, either. The agreements typically warrant just a few paragraphs in a company’s I.P.O. filings.

So that last part, meh. The prospectus for Berry Plastics – the main example DealBook cites – describes its income tax receivable agreement in several places and pretty clearly. It explains what’s going on – “we’re funneling 85% of our tax savings from current NOLs to our pre-IPO shareholders” – and even gives some numbers, estimating that the payments will total $310 to $350 million and mostly be paid by 2016.1 It’s not really all that tricky. Read more »

  • 11 Mar 2013 at 10:29 AM
  • IPO

Bankrupt 1990s Internet Toy Company Still Thinks It Was Undervalued

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To get a sense of how old the Goldman Sachs IPO lawsuit-and-maybe-scandal that Joe Nocera and Felix Salmon wrote about this weekend is, consider this: the alleged victim was a company named eToys. With the “e,” and the “Toys,” and the weird capitalization. Also Henry Blodget was the analyst who covered them at Merrill. Different times!

Nocera gives the basic facts and there’s something a little off about them:

The eToys initial public offering [in May 1999] raised $164 million [at $20/share], a nice chunk of change for a two-year-old company. But it wasn’t even close to the $600 million-plus the company could have raised if the offering price had more realistically reflected the intense demand for eToys shares. The firm that underwrote the I.P.O. — and effectively set the $20 price — was Goldman Sachs.

After the Internet bubble burst — and eToys, starved for cash, went out of business [in March 2001] — lawyers representing eToys’ creditors’ committee sued Goldman Sachs over that I.P.O.

The theory of the lawsuit is that Goldman screwed eToys on behalf of investors, pricing the IPO at $20 per share, rather than the $78 justified by demand, as evidenced by the fact that the stock briefly traded at $78 on the first day. An alternative theory is that Goldman screwed investors on behalf of eToys, pricing the IPO at $20 per share, rather than the $0 justified by fundamental value, as evidenced by the fact that the company went out of business 22 months after the IPO. Also it was called eToys come on. Read more »

  • 20 Feb 2013 at 5:15 PM

Blackstone Penguins To Take Their Show On The Road?

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If the private equity firm is really serious about an IPO of SeaWorld, these guys are obviously the best people to peddle the company’s wares. For all we know, last month’s visit was a dry run of the roadshow presentation. [Bloomberg]

  • 02 Jan 2013 at 1:19 PM

India Looking To Innovate With IPOs That Can Only Go Up

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Of all the things you can get mad about in the world, volatile prices for companies that have recently IPOed seems like sort of a silly one. Like, yesterday there was no market for this stock, and today there is, and tomorrow that market may have a price that is very different from today’s, and you’re mad about that? Something was created out of nothing! It’s magic! And you’re complaining about some bugs in that creation?

Speaking of magic, the Journal today has a cute story about the Indian stock market and how its IPOs are volatile. There is of course an implication of “… because of fraud” but it’s not clear how much more than an implication it is:

“There was a feeling in this country that many IPOs are manipulated,” U.K. Sinha, chairman of the Securities & Exchange Board of India, said in an interview.

Note the delicacy of saying “there was a feeling that IPOs are manipulated,” which means “IPOs are volatile,” versus saying “IPOs are manipulated,” which means “IPOs are manipulated.” He only said the first one.

Anyway here is Mr. Sinha’s entertaining solution: Read more »

  • 18 Dec 2012 at 2:05 PM

Earnings-Manipulating Managers Just Want To Make Shareholders Happy

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I’m generally fond of companies that find creative ways to access the public equity markets while not giving away all the “rights” that traditionally go to “owners” of “companies.” I mean, you want money, you ask people for money, you give them the terms that you need to give them to get the money: what is so sacred about shareholder voting rights?

At the same time though I’m a little skeptical of some of the reasons that private companies give for not wanting to go public. These seem to me to be basically two:

  • High-frequency-trading computers robots algorithms crash scary scary.
  • “If we go public our shareholders will force us to focus on quarterly earnings rather than the long-term good of the company.”

The first one, as you might notice from its grammar, seems ill-defined, though the fact that like every high-profile IPO this year has suffered from a computer glitch makes me think that it’s on to something. Something vague though. The second one: I mean, just don’t do that. What’s gonna happen to you if you manage for the long-term good of the company? Your stock will go down this quarter? Who cares? I thought you were in this for the long haul?

But they’ve got a point. Today in “shareholders are assholes,” here’s a delightful recent paper by three business professors about how stronger shareholder rights make companies more likely to manage earnings.1 As they point out, you could have two models of how strong public-shareholder rights (i.e. things like robust shareholder voting rights, weak anti-takeover provisions, etc.) affect corporate behavior:

  • Shareholders are good and will make companies do good things if they’re empowered,2 or
  • Shareholders are self-interested jerks and will make companies do bad things if it makes them more money.

There’s no particular reason to believe the first one but, y’know, it’s a hypothesis; it is also wrong: Read more »

  • 17 Dec 2012 at 3:24 PM

Banker Got In Trouble For Telling Client To Be Honest With Research Analysts

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You may be aware that once there was a problem and this was the problem:

  • Investment bankers wanted to win underwriting business.
  • They realized that having their research analysts shout “BUY BUY BUY!” about every company they underwrote would help to win this business.
  • So they went to their analysts and were all “do that.”
  • The analysts, for cost-center and spinelessness reasons, did.
  • But in classic passive-aggressive fashion they sent each other emails to the effect of “oh, man, my fingers were totally crossed when I issued that Buy recommendation, that company is dogshit.”1
  • It was dogshit, and investors lost money buying those Buys.

This problem was solved via a Global Research Settlement among a bunch of banks, a bunch of state attorneys general, and the SEC. The settlement had various technical provisions around who could talk to whom about what when, but the gist of it was “yo, bankers, stop telling your analysts to talk up shitty stocks.”

You can understand why Morgan Stanley banker Michael Grimes2 would not think that he violated this settlement when he (1) learned that the Facebook underwriting syndicate’s research analysts (including Morgan Stanley’s) had estimates for Facebook’s 2Q2012 revenue were higher than what Facebook expected, (2) told Facebook something to the effect of “hey, it would look really bad if you did an IPO based on misleadingly high revenue estimates, you should guide the analysts lower,” and (3) sat with Facebook’s Treasurer in a hotel room while she did that.

I mean! You can get mad at Grimes, and Facebook, and the research analysts, because that happened.3 Read more »