IPO reading 1

IPO reading 1 - Salomon Made IPO Allocations Available to...

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Salomon Made IPO Allocations Available to Ebbers, Others By Charles Gasparino, Tom Hamburger and Deborah Solomon 2495 words 28 August 2002 The Wall Street Journal A1 English (Copyright (c) 2002, Dow Jones & Company, Inc.) At a time when WorldCom Inc. was sending tens of millions of dollars in investment-banking business to Salomon Smith Barney, the big Wall Street firm allocated nearly one million shares of coveted initial public offerings to Bernard Ebbers, the telecom company's former chief executive. But perhaps more surprising: Senior brokers at Salomon also sought to dole out tens of thousands of hot IPO shares to nearly two dozen other top telecom executives -- all at a time when the telecom business was frothy with merger activity and Salomon was the industry's leading banker. The allocations, disclosed in documents submitted to a congressional committee investigating WorldCom, show what appears to be a systematic effort at Salomon to reward numerous top telecom executives by making available shares of then-hot IPOs. And the submission goes a long way toward documenting what many investors have long suspected: At a time when it was next to impossible for average speculators to get their hands on such IPO shares, top telecom executives -- many of them already billionaires -- had little trouble snagging the stock in large chunks. While the linking of investment-banking business to IPO allocations has been a controversial, yet pervasive, practice on Wall Street -- it was the subject of a page one story in The Wall Street Journal in 1997 -- the Salomon-WorldCom documents offer, in unusual detail, numbers on how the practice may have worked. In one March 31, 1999, document, for instance, Salomon brokers provided a wish list of executives they hoped would receive IPO shares of Rhythms Netconnections Inc., a telecommunications company that would more than triple in value on its first day of trading. Most of the executives named were banking clients of Salomon. While it's unclear how many of the 26 executives actually received any shares -- and some said yesterday they didn't receive any -- the fact that such a document exists appears to paint a picture of a formalized process at Salomon to consider top clients when making IPO allocation decisions. In fact, it's notable that many of the executives whose names appear on the Rhythms Netconnections list, including former Qwest Communications International Inc. Chief Executive Joseph P. Nacchio and James Voelker, the retired president of Nextlink Communications Inc.,
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also turn up on a separate document, dated May 1999, detailing a wish list for allocations to Juno Online Services Inc., another IPO. Salomon officials say there is no firm link between the memos and who actually got shares. "The memos merely indicate expressions of interest -- as is consistent with the allocation process," says Susan Thompson, a Salomon spokeswoman. "There was a huge difference between what people wanted and what they got."
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This note was uploaded on 03/09/2008 for the course FINC 725 taught by Professor Hansen during the Spring '08 term at Tulane.

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IPO reading 1 - Salomon Made IPO Allocations Available to...

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