Speaking of biotech coverage, this WSJ article from a few days back gives a pretty bleak outlook for Robbie Stephens:
June 13, 2002
DEALS & DEAL MAKERS
Robertson Stephens Rode Wave
Of IPOs, Now Fights for Survival
By SUSANNE CRAIG and GARY PUTKA
Staff Reporters of THE WALL STREET JOURNAL
Dow Jones, Reuters
Robertson Stephens, the once red-hot investment bank boutique that took some of the industry's best known dot-coms public only to see them founder, is itself now struggling to survive.
Senior executives at the storied San Francisco technology-company specialist have been huddled behind closed doors in Boston this week, working to convince management at parent FleetBoston Financial Corp. to agree to a management buyout of the firm rather than simply pull the plug altogether.
The possibility of liquidation has been growing in recent days, according to people familiar with the matter, as FleetBoston Financial has seen a dearth of bids since FleetBoston announced in April that it was selling Robertson because of the business's growing losses. And even if the firm does survive, it may be in a stripped-down version.
Underscoring a Gloomy Outlook
The trouble FleetBoston is having in finding a buyer for Robertson underscores the gloomy outlook for the investment-banking business. After stocks tanked in 2000, the market for initial public stock offerings has dropped along with mergers and acquisitions, and the technology business has been hardest hit.
Robertson, whose employees currently own 23% of the firm, was one of four "growth"-company investment boutiques called the HARM group -- short for Hambrecht & Quist Inc., Alex. Brown & Sons Inc., Robertson and Montgomery Securities Inc. -- that were all snapped up in the late 1990s by big commercial banks storming the ramparts of investment banking.
All have since stumbled and shrunk, but none more than Robertson. While it took public some Internet survivors such as online broker E*Trade Group Inc., it also brought public many that have gone bust, including Varsity Books.com and Oplink Communications Inc.
After acting as lead underwriter on 74 IPOs in 1999 and 2000, valued at $5.5 billion, Robertson has done only two deals, valued at $76.5 million, since then, according Thomson Financial. The firm hasn't led any tech IPOs this year. That is symptomatic of the general slowdown in tech-stock issuance; the volume of tech IPOs so far this year has fallen 86% to $1.7 billion from $11.8 billion in the same period of 2000.
"The problem for Robertson is that its niche, technology, had a huge ramping up and it's hard to imagine the financing cycle coming back for years now," says Merrill Lynch analyst Judah Kraushaar. "Bottom line is, it's a company that is losing money and has hazy prospects."
Off the Mark
When FleetBoston disclosed in April its plans to sell Robertson, some insiders had estimated that Robertson could fetch as much as $600 million. But that figure now appears to be far off the mark. BankBoston bought Robertson for $800 million in 1998.
The only bid on the table is the Robertson management offer. Led by Chief Executive John Conlin, President Todd Carter and former CEO Mike McCaffrey, the management offer has shortcomings in Fleet's eyes, according to people familiar with the talks. It would give the Boston bank little money up front; instead, the Robertson team is hoping to pay primarily by forgoing approximately $100 million in deferred compensation it is owed by Fleet, and assuming some liabilities, such as building leases.
With a lack of outside financing for the proposed deal limiting the terms, FleetBoston has been reluctant to extend credit itself in its effort to wash its hands of the securities business. The sale is likely to result in a charge against earnings. Robertson is carried on Fleet's books at about $600 million, well above the $100 million price tag being discussed. FleetBoston has already said it expects to book a gain of about $300 million this quarter for the sale of its student-loan-servicing business. That could help offset a charge on a Robertson sale.
Fleet, says one person familiar with the matter, has decided it is "going to exit the business and to do it now," so that it can pursue its strategy of refocusing on retail banking and commercial lending. FleetBoston may well announce Robertson's fate before the second quarter ends.
Possible Bidders
The talk of liquidation comes as defections of top bankers have accelerated, notably health-care banker Mark Simon who recently left for Citigroup Inc.'s Salomon Smith Barney unit and accounted for a quarter or more of Robertson's current banking business. Separately, a team of analysts moved to the SG Cowen unit of Societe Generale SA last week.
Among other possible bidders, the most serious were Jefferies Group Inc., Bear Stearns Cos. and Nomura Securities Co. But in the end, many industry players were scared off not only by the weak market for technology business, but also by the potential liability from lawsuits related to regulatory probes of IPO allocations. Fleet may revisit discussions with these players, many of whom were interested in pieces of Robertson's business, if the management offer fails.
The regulatory unit of the National Association of Securities Dealers has notified Robertson, among others, that it could face civil charges for taking excessive commissions from big investors who received hot IPO shares in 1999 and 2000, according to people familiar with the matter.
In a separate investigation, the Securities and Exchange Commission is examining whether some securities firms, including Robertson, coerced investors who got hot IPO shares into placing orders for the same stocks at higher prices on the first day of trading, as a condition of getting the IPOs. That practice, known as "laddering," contributed to the huge one-day run-ups in many IPOs during the tech-stock mania.
Sandy Robertson, who co-founded the firm in 1969 but left a few years ago and now manages a tech-buyout fund, considered making an offer, but eventually didn't. Representatives for Jefferies, Bear Stearns and Nomura declined to comment.
Robertson became part of FleetBoston after that bank's 1999 takeover of BankBoston, which had bought Robertson the year before. The investment bank posted stellar results in the bull market, with profits of $216 million in the peak year of 2000, but last year, Robertson's revenue dropped 71% and it lost $61 million.
Advantage: Big Investment Firm
FleetBoston reduced the unit's staff by 39%, to 950, and clashed with its former top executives, led by Robert Emery, over a combined pay package of $70 million; Mr. Emery and another executive were ousted last year over the issue. The experience left a bad taste in Fleet's mouth and people familiar with the matter say it would rather fold Robertson rather than sell the firm to management only to see it possibly prosper in the future.
At the same time, insiders at Robertson have been critical of the way FleetBoston has handled the sale, including its decision to announce its plan publicly, which many feel smelled of desperation. And in explaining why it was exiting the business, they contend, FleetBoston made the boutique bank look unattractive as a stand-alone firm when FleetBoston CEO Chad Gifford said, "It is increasingly clear that advantage in the future will accrue to the large, diversified investment-banking firms."
FleetBoston balked at the Robertson management's initial proposal, which would have required FleetBoston to leave a sizable amount of capital, in the form of a subordinated note valued at about $630 million, at the firm. Management then came back with a second proposal, one that would require less capital but would see Robertson exit some businesses and lay off more people.
The amount of deferred compensation Robertson has been willing to give up has fallen in recent weeks, and currently stands at about $80 million, down from more than $100 million. One person near the negotiations says the relationship between FleetBoston and Robertson is so strained, it is impossible to predict what will happen. "There is a lack of trust on both sides," he says.
Corrections & Amplifications:
VarsityBooks.com and Oplink Communications Inc. are still in business. The article above incorrectly indicated that the dot-com companies had ceased operations.
Write to Susanne Craig at susanne.craig@wsj.com1 and Gary Putka at gary.putka@wsj.com2
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Updated June 13, 2002 11:59 p.m. EDT
Peter |
