The IPO of Thomas Weisel Partners took off yesterday, jumping over 30% in intraday trading. The Deal has reported that this was great news for bankers, but that it surprised most analysts. Apparently, a lukewarm welcome was expected for the IPO due to a large decline in revenue from 2000 to 2004 as most tech deals went into hibernation.
Why did the IPO soar? The Deal reports that the stock rise is likely due to fund clients at the firm who rallied together to support the IPO, despite the withdrawal of Goldman as an underwriter. Apparently, market sources say these were mostly institution tech-focused funds.
It's been a while since the "IPO Spinning" days of 1999 where major investment banks gave IPO shares to select clients of the firm in exchange for future business. This case with the Weisel IPO sounds like the exact opposite - that in exchange for buying shares in the IPO, the firm could potentially offer better pricing and service for those institutional clients. Now usually, there shouldn't be anything wrong with something like this happening. However, there are strict guidelines put out by the SEC about marketing your IPO on the IPO roadshow. A quiet period exists and investors in the offering are supposed to be convinced of participation by the prospectus and the roadshow, not by anything else. Something seems wrong with this picture...
Ironically, it is once again an investment bank at the center of it.
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