Moelis & Co. climbed in its trading debut after raising less than planned in the first U.S. initial public offering of an investment bank since the financial crisis.
The shares rose 4.6% to $26.15 on Wednesday after pricing at $25. Moelis raised $163 million in the offering, which was structured to let longtime Los Angeles investment banker Chief Executive Ken Moelis retain control while still receiving a payout.
Moelis is testing investors' appetite for new investment-banking shares for the first time in the U.S. since FBR & Co. went public in 2007, according to data compiled by Bloomberg. He's selling stock amid the strongest start to a year for mergers and acquisitions since 2007, the data show.
"The cycle is good for M&A," Moelis, 55, said. "There's more growth in the future than in the past."
His firm worked on deals including the takeover of HJ Heinz Co. by a group including Warren Buffett's Berkshire Hathaway Inc. Since Moelis announced its IPO plans on April 4, shares of competitors have dropped, with Evercore Partners Inc. tumbling 8.1% through Tuesday and Greenhill & Co. sliding 4.3%.
Moelis pared the size of its offering to 6.5 million shares from 7.3 million and dropped the price below the offering range of $26 to $29.
The pricing is "probably more of a reflection of the market weakness than a commentary on the business," said Peter Nesvold, a managing director at merger-advisory firm Silver Lane Advisors in New York. "Since they set the range, the closest peers are down."
Ken Moelis, who also has advised Carl Icahn, Donald Trump and Steve Wynn, is joining the ranks of deal makers who have harvested the rewards of setting up their own businesses. At the offering price, his stock was valued at about $332 million, with an additional $87 million in trust for his family, data compiled by Bloomberg show.
Moelis & Co. planned to use 80% of the proceeds for one-time payments to the founder and his partners, filings show. The rest will be invested in the firm.
The investment bank estimated last week that first-quarter revenue almost doubled to about $114 million from the same period a year earlier. The company should continue to grow this year, Moelis said.Copyright © 2015, Los Angeles Times