It's an e-eat-e world
Electronic distribution of capital ruffles Wall Street
By Thom Calandra, CBS MarketWatch
Last Update: 5:40 PM ET Jun 10, 1999 Also: Options Watch
NEW YORK (CBS.MW) -- It's an e-eat-e world. E for e-loans, e-offerings, e-banks, ECNs, e-commerce.
In the cozy world of corporate finance, the electronic delivery of capital is rumbling through New York, London, Boston and San Francisco, where lawyers, bankers and executives at one very large stock exchange at the corner of Wall and Broad streets are looking nervously over their shoulders.
Waiting for the other e-shoe to drop.
The Island ECN, the electronic communications network controlled by Datek Holdings, says it doesn't expect the Securities and Exchange Commission to rule on its application to become a self-regulated stock exchange for a year or more. Still, Island, the second largest electronic trading network for stocks in the United States, could become the first new U.S. exchange in 25 years.
Investment banker Sandy Robertson's www.eoffering.com, which offers 50 percent of all the IPOs it underwrites to E-Trade customers, this week opened its indication book for the first time for secondary shares of Web lender First Sierra Financial. E-broker E-Trade (EGRP: news, msgs) owns a piece of e-offering.
The underwriting of shares, because of Robertson, Bill Hambrecht and other pioneering bankers, is becoming less of a Wall Street undertaking and more of a Main Street one.
Oh, and those e-brokers. And ECNs. And e-bankers.
6-month chart: Knight-Trimark
"Be not afraid," an E-Trade television ad advises. Tell that to the bankers whose birthright was splitting 7 percent underwriting fees for a conventional IPO. After all, who needs a syndicate to distribute freshly scrubbed securities when you have a World Wide Web?
Putnam, Lovell, the San Francisco investment banking firm that advises financial services companies, says nearly all investors will use the Internet to access their accounts in coming years. "The barriers to entry are low but barriers to success remain high," Putnam, Lovell analyst Gregory Smith said.
'Brutally efficient marketplace . . . '
Wit Capital (WITC: news, msgs), the maverick banking firm armed with a Web site, hopes to initiate 24-hour trading later this year. Wit distributes small pieces of IPOs to individual investors.
The largest Nasdaq market maker, Knight-Trimark (NITE: news, msgs), says it will unveil a Web site for trading this autumn. "We think there will be a tremendous opportunity to take business away from the New York Stock Exchange," Knight-Trimark's executive vice president Walter Raquet this week told West Coast fund managers in San Francisco.
The best remark I have seen recently about this e-eat-e world came from Bob Gold, a New York City consultant at Transaction Information Systems. The Internet's "brutally efficient marketplace . . . will switch the power from the sell-side to the buy-side," Gold told CFO magazine. Touché for the buy-side -- the individual investors and the mutual funds, trust funds and pension funds that represent them.
Next week, a group of traditional bankers and their e-counterparts will talk about their hopes, their fears, maybe their birthrights. Former Apple Computer CEO (AAPL: news, msgs) John Sculley will discuss his role as a so-called venture catalyst. Sculley and his two brothers, Arthur and David, run an investment capital firm that has sunk money into 20 companies in Israel, Bermuda, New York and Silicon Valley.
Sculley will be joined at a New York City breakfast meeting Tuesday by Carolyn Buck Luce, national director of e-commerce for Ernst and Young. Buck Luce spent 17 year in investment banking and consulting.
Also attending the 8 a.m. panel at the Harvard Club will be John Forlines III, a managing director at J.P. Morgan and Co. (JPM: news, msgs). J.P. Morgan Thursday said it would buy 20 percent of the ECN Archipelago. For J.P. Morgan, it is the first foray into the world of U.S.-based ECNs, which trade largely Nasdaq stocks. J.P. Morgan has a stake in Tradepoint Financial Networks PLC, a British ECN.
Wall Street institutions, looking over their shoulders, are shelling out tens of millions for these ECNs and other alternative trading systems, which account for as much as a fifth of all U.S. stock trades. This week, Madoff Investment Securities, a top market maker, linked with Merrill Lynch (MER: news, msgs) and Goldman Sachs (GS: news, msgs) to form Primex Trading, a platform to trade stocks using an auction system. See the story.
Waterhouse Investor Services, the third-largest Internet broker, owns a 12.5 percent piece of the Island ECN. Microsoft co-founder Paul Allen's venture fund is investing $25 million for a 12 percent stake in Island ECN And so on. See related story.
Rounding out the panel next week, Wit Capital Chairman and CEO Robert Lessin is sure to ruffle some starched white shirts at the breakfast, which is free. Lessin sits on the board of MarketWatch.com, the publisher of this Web site.
IntraLinks Inc., a Web-based deal management service for global capital markets, is the sponsor of the breakfast. For more information, send an e-mail to courtney@middleberg.com. I'll be moderating the event between bites of e-muffins. |
