via cbs.marketwatch
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Clueless Investor
Ameritrade scraps secondary amid slide
By Brenon Daly, CBS MarketWatch
Last Update: 11:05 AM ET Aug 3, 1999
OMAHA, Neb. (CBS.MW) – Supply and demand.
It's the basic law that governs the market, and an investment bank can look awfully clueless when it tries to overlook this basic dictate.
Consider the case of Ameritrade, which registered at the end of June to sell about $250 million worth of stock, in a Goldman Sachs-led deal. While the deal was being formed, the stock price was sliding.
Shares of the online brokerage (AMTD) have been cut nearly in half from last month's highs. On Monday, the stock shed 15/16 to 24.
Money, money
Common sense reminds us that stocks decline when there are more sellers than buyers for the stock that is already available.
Stands to reason that adding more shares would just create more "downward pressure" as investment bankers like to euphemistically put it.
Of course, if there's a dollar to be made, investment banks are willing to go after it. Underwriting fees for a secondary offering are in the neighborhood of the 4 percent of the total amount.
In other words, Goldman stood to gain about a cool $1 million if the secondary had gone through.
In the end, Goldman bowed to the market and pulled the stock offering. Instead, the online trading site is planning to fatten up its balance sheet with a $200 million debt offering. See related story.
So it seems even the most powerful investment bank still has to mind the market. |
