Goldman is US' IPO manager No 1

Goldman is US' IPO manager No 1

NEW YORK: Goldman Sachs Group won the biggest share of the $923-million in fees from the US initial public offerings this year, while Citigroup out of the top five after its revenue plummeted more than 50%.

Goldman Sachs made $191.6 million helping take 16 companies from Hyatt Hotels Corp to Cobalt International Energy public this year, an increase of more than 60% from 2008, preliminary data compiled by Bloomberg show. Citigroup’s share of fees dropped to $68.3 million, making the New York-based lender the only underwriter that participated in at least $1 billion worth of sales to suffer a decline in revenue.

Banks increased fees for initial share sales by 62% to 5.63% from the lowest level on record, even as the amount that US companies raised from IPOs decreased by almost half to $16.4 billion this year, according to Bloomberg data. While the biggest surge in stocks since the Great Depression revived the IPO market and helped enrich bankers, almost 40% of offerings sold by underwriters in the second half of 2009 have left buyers with losses.

“It was sort of like a feeding frenzy, whatever deal came people wanted to buy it,” New York-based head of the equities syndicate for the Americas at Barclays, which climbed into the top 10 among underwriters for the US IPOs after doubling its share of offerings this year. In the second half, “there were some aggressive valuations that people have pushed back on”, as the performance of IPOs suffered, he said. :

IPOs are among the most lucrative advisory businesses on the Wall Street, with bankers extracting fees from companies that seek initial offerings that are more than 10 times higher than those from mergers and acquisitions or corporate-bond sales.

During the five-year bull market for stock prices that ended in 2007, underwriters on average kept 5.93% of the money raised from IPOs the by US companies, Bloomberg data show.

This year, fees averaged about 5.63% of proceeds, up from a record low of 3.48% in 2008, when the worst financial crisis since the 1930s sparked the collapse of New York-based Lehman Brothers Holdings in September and forced the government to give nine of the largest US banks $125 billion in bailout money, fee data compiled by Bloomberg since 1999 show.

The higher fees helped to limit the decline in revenue from the US IPOs in 2009 to about 10% from $1.03 billion last year. The amount raised by the US companies going public slumped 45% from $29.6 billion, as sales evaporated in the fourth quarter of 2008 after Lehman’s failure froze credit markets.

The drought lasted until September as an average of two US companies a month went public, the slowest pace since at least 1995, according to data compiled by Bloomberg.

The IPO market then rebounded, as companies took advantage of a 67% advance in the Standard & Poor’s 500 Index from its 12-year low in March. Thirty-two companies completed offerings since the start of September, equal to 68% of the 47 initial sales in 2009, Bloomberg data show.

source-et