After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

Boy it’s been so long that I saw the term IPO in a headline that I had to Google what it meant.

“Initial Public Offering”… and everything came flooding back to me.

When a stockbroker is about to die, he doesn’t see his life flash before him, he sees the front covers of hundreds of prospectuses, their opening price and all of the contract notes attached to them.

We used to call the printed prospectus “the fat bit ahead of the application form”.

Back in my early days, they truly were open to the public, but as time’s gone on it becomes a bit of who you know to get a look-in.

When the government sold off another chunk of CBA shares to the public in 1996, anyone could apply.

Being a broker, if you put your stamp and ref onto an application form, you got paid a 5% commission.

Every branch of the CBA had a stand with prospectuses in them and we would send out the juniors with our stamps, so they could stamp all the applications, even though they had nothing to do with us.

This bit of broking ingenuity paid for a week away at Albany Resort in the Bahamas, when winter hit, after our 5% commission cheques rolled in. (Some of you may now have to Google the word ‘cheque’.)

ARMed and dangerous

Anyway, there seems to have been a few cracking IPOs over in America.

The biggest recent one was called ARM and even though it was a UK company, they chose America over a FTSE listing.

The fees are what I was honing in on today, more out of curiosity and if I’m honest, a little bit of jealousy.

I reckon instead of getting away for a week at Albany Resort, I could be buying the whole place if I was an American broker.

The fees alone to the accountants and the likes were US$84m, the rump of which (duck for cover) went to Deloittes, as their accounts had to go from International specification to US standards.

They in fact got a cheque for US$51m, whereas the lawyers involved (Morrison & Foerster), had to make do with a sniffly little amount of U$17m.

So, we are up to US$84m and so far we haven’t looked at the underwriting fees for the merchant banks. (By the way, that US$84m is about seven times more than the norm.)

The underwriting fees came in at US$104m, with the lead underwriter getting US$18m.

Which American bank got the US$18m in fees you may well ask?

Well, it was not an American bank but a Japanese bank called Mizuho Financial Group who won the honours.

I must admit that the last time I thought I saw the name Mizuho, it was whizzing past me on a plate at a sushi train.

However, you may well laugh but Mizuho does actually mean ‘a bountiful harvest of rice’, though I’m sure the big cheeses at the top will be eating anything but rice for the next year.

This I kid you not, is from their website:

In Japanese, mizuho means ‘a bountiful harvest of rice’, and our name expresses our continuing commitment to offer highly valuable financial products and services to all of our customers, all over the world.

Maybe Goldman Sachs should take a leaf out of their book if they want to lead the underwriting of the next big IPO, as they are just named after a couple of old blokes.

Just doesn’t have the same ring as a Japanese merchant bank, does it? I would be suggesting names like McDonalds Partnership or KFC Investments to get them to the table.

Anyway, I’m hoping that this spark up in IPO land in America may just rub off on their counterparts over here and someone chooses our aptly named merchant bank ‘Barrenjoey’ as an underwriter.

On their website they just say that ‘Barrenjoey’ means’ kangaroo’. I also kid you not.

Enter the Tarocash Brigade

All of this reminds me of the time that Russell Crowe appeared on American TV after he had just bought a stake in an NRL team.

The interviewer said that “over here in America, we have sports teams named after real mean creatures like scorpions and snakes”.

“Which animal is your team named after Russell?”

“Er, a rabbit.”

Nothing like a rabbit on your shirt to scare the opposition, or having a stuffed kangaroo by your side when you are pitching for your next IPO underwriting.

Oh Australia, you really do crack me up.

According to my back of envelope calculations, there are 17 potential IPOs currently lined up in Australia and they are looking to raise a combined amount of $199m, which almost matches the fees in the ARM IPO.

You can see why these days, brokers over here can only afford to dress like real estate agents at a Saturday open house. There is just not enough money to go around.

Takeovers and delistings means that the combined valuations of listed companies are shrinking more than bits of me on a winter’s swim in the sea.

We have IPO deflation over here and in the UK, but America has the opposite.

Over in Japan, they are also suffering from listing shrinkage, as it appears that after being listed for 74 years, Toshiba is going to be taken private.

In Japan, if you own more than 75% of a company you can take it private and the other 25% can’t do anything about it. They have to sell their stock.

Toshiba was started in 1875 and was famous for making the world’s first mass produced laptop computer.

And the reason why the board was happy to accept private equity taking them private? To avoid “having to be accountable” to shareholders!

This is also one of the problems over here.

There is so much paperwork and red tape, that the private equity route has become the easier option, rather than floating yourself off.

It appears that private equity has deeper pockets than your now average Mum and Dad punters and that’s why it’s not just me suffering from shrinkage.

Time for a hot bath!


The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.