Professional Documents
Culture Documents
Lect 15 IBanks
Lect 15 IBanks
Investment Banks
Bulge bracket firms: First Boston, Goldman Sachs, Merrill Lynch, Morgan Stanley, Salomon Brothers, Lehman Brothers. Traditionally were often partnerships, but partnership form is disappearing.
Mergers among Commercial Banks, Investment Banks & Insurance Companies Travelers Group (insurance) and Citicorp
(commercial bank) 1998 to produce Citigroup, on anticipation that Glass-Steagall would be rescinded. Brokerage Smith Barney Chase Manhattan Bank (commercial bank) acquires JP Morgan (investment bank) (2000) for $34.5 billion UBS Switzerland buys Paine Webber (brokerage) 2000 Credit Suisse buys Donaldson Lufkin Jenrette (investment bank) 2000
Underwriting of Securities
Issuance of shares and corporate debt Seasoned issue versus IPO Underwriter provides advice for issuer, distribution of securities, sharing of risks of issue, and stabilization of aftermarket. Underwriter also certifies the issue by putting its reputation behind the issue.
Stabilization
A form of market manipulation by the underwriter near the time of the issue that is permitted by the SEC Underwriting syndicate legally allowed to conspire to fix prices in market until entire issue is sold out
The Tombstone
Newspaper announcements of securities issues, listing underwriting syndicate Why called tombstones? Origin of term forgotten. Resemblance? The only kind of ad allowed during cooling-off period Cross between birth announcement and obituary. Tombstones appear after the securities have already been sold, but of course they are now on the market. Investment bankers love to read them
Private Placement
Sold only to sophisticated investors, exempt from SEC registration. Regulation D: Private issues cannot be advertised, defines sophisticated investors SEC has provided that privately placed securities cannot be sold for two years after purchase. SEC Rule 144a April 1990 eliminates two-year holding period for institutions with over $100 million in the security