Underwriting Fallout

Boy how things have changed and in today's market investment banking is one of the first units to see jobs cut. Just the other day, Robertson Stephens announced layoffs at its IB division and Merrill Lynch is about to do the same.

In this environment, Robertson Stephens has had a hard time surviving and by the time the quarter was over, it only lead managed one transaction. In the comparable period last year, Robertson led 15 IPOs totaling $1.1 billion. Again, the problem at hand for Robertson is that tech is out of season while alternative energy appears to be in.

"The first quarter of 2000 was good for Robertson Stephens because tech was in vogue," added one syndicate professional. "Along with Robertson, Deutsche Banc Alex. Brown and the newly formed J.P. Morgan were hurt because they were all technology underwriting specialists."

Other interesting patterns that immediately come out are the lack of viability during the quarter by UBS Warburg. UBS is known for underwriting biotech stocks. In this environment, biotech is extremely volatile and makes the life of syndicate professionals at the UBS house horrendous. During the quarter, they tried to sell Xenogen to the Street. After several revisions and lack of demand for any price of the stock, UBS pulled the offering and basically shut down the IPO underwriting faucet.

In terms of fallout, everyone has had to bear the responsibility of failing to underwrite a fair share of transactions. We could also lay blame on Fed Chairman Alan Greenspan for not acting sooner to lower rates. Perhaps if the sage lowered rates by 75 basis points last time, we would be facing a much more clear picture for the second quarter.

With comments, media interviews or questions feel free to e-mail me at jeffh@ipomonitor.com.

Jeffrey R. Hirschkorn is a New York-based independent IPO analyst and daily contributor to IPO Monitor.

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