11-12-08 - Entrepreneurship I Class Notes J.P Morgan...

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Entrepreneurship I – Class Notes – 11/12/08 J.P Morgan – pioneers in investment banking Different from commercial banking Little banks are small and once the railway network comes in, you will have metro areas with a quarter million people National railway network allows for national network – commercial scales To give birth to trusts, you need an investment banker whose job is to promote how companies go public (through IPOs), stocks and bonds issued. o If you get a guaranteed placement, the investment banker will give you 15 million and the investment banker’s job is to find people to buy those shares – if they can’t find enough buyers, they take a hit – (unsubscribed issue) o Oversubscribed issue – might not be good for investment banker eighter J.P Morgan – character” o Excellent in reorganizing the railroads in 1890s o Tells the bond holders – here’s the situation – get rid of bonded debt and replace with equity Railways have to get rid of their dividends Use stocks – even though the stock price might fall, the railyway will not be in default He also got a syndicate together to bolster the gold standard BIGGEST THING – a dozen or so bankers and Morgan managed to halt the Panic of 1907 – limit the impact (still a bad recession) Important thing that made him so different from other bankers – his family and his
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11-12-08 - Entrepreneurship I Class Notes J.P Morgan...

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