Salomon Slides on List of Top Underwriters
Salomon Bros. Inc., hurt by its government securities scandal, fell two notches to fifth place among Wall Street firms in the latest ranking of underwriters of new issues of stocks and bonds.
But the firm disagreed with the figures and denied that Salomon’s underwriting statistics reflect a deteriorating outlook for its ability to raise new capital for companies.
In figures released Monday by Securities Data Co. for the first nine months of 1991, Merrill Lynch & Co. again came in No. 1, a position it has held for 15 consecutive quarters. Salomon, long one of the leading underwriting powerhouses, dropped to fifth place this year from third for the first nine months of 1990.
Salomon’s fall in rank came during an interval when rising stock prices and falling interest rates caused an explosion in the total volume of new issues. Securities Data said new issues offered publicly by Wall Street firms hit an all-time high of $408.3 billion for the first nine months of 1991, up 71% from $238.2 billion in the first nine months of 1990.
The drop in ranking helped send Salomon’s stock down by $1 a share Monday to close at $23.625 in New York Stock Exchange trading.
Goldman, Sachs & Co. remained in second-place in the rankings. Shearson Lehman Bros. and First Boston Corp. leap-frogged over Salomon to take third and fourth places.
Stung by the fall in ranking, Salomon criticized the way the figures were compiled. Jessica Palmer, a managing director and head of Salomon Bros.’ capital markets group, complained that the Securities Data figures don’t include a $2.7-billion equity rights offering the firm carried out for Time Warner Inc. If counted, it would have put Salomon ahead of First Boston, in fourth place.
A Securities Data official said the offering wasn’t counted because the statistics only include public offerings. The Time Warner rights weren’t sold to the public, but only to investors who already held the company’s stock.
Salomon’s share of the new-issue market dropped to 9.5% from 10.5% last year, according to the figures. “While market share is important, profitability is more important,” Palmer said. “I have been very pleased with the net profitability of our underwriting business.” She declined to disclose specific figures, however. Wall Street firms customarily don’t release such numbers.
In a separate development, the Pennsylvania state treasurer said she filed a class-action lawsuit against Salomon in federal court in New York. Treasurer Catherine Baker Knoll bought a total of $175 million in two-year notes in two Treasury auctions this spring for the state.
Salomon has admitted making unauthorized use of customers’ names on bids in the auctions and buying more than its permitted share of securities. The suit claims Salomon’s actions distorted the price of the securities.
Salomon Bros. Slips For the first nine months of 1990, Salomon Bros. was the No. 3 issuer of new corporate stocks and bonds. For the same period of 1991, the troubled firm dropped to fifth place. A look at the top 10 issuers of new corporate stocks and bonds.
Jan.-Sept., ’91 Jan.-Sept., ’90 Proceeds Proceeds Managers (in billions) Rank (in billions) Rank Merrill Lynch 73.4 1 37.7 1 Goldman Sachs 47.3 2 32.1 2 Lehman Bros. 42.8 3 16.5 6 First Boston 39.8 4 24.4 4 Salomon Bros. 38.6 5 25.1 3 Kidder Peabody 36.4 6 15.7 7 Morgan Stanley 32.1 7 23.0 5 Bear Stearns 12.6 9 10.5 9 Donaldson, Lufkin & Jenrette 8.5 10 4,789.3 10
Source: Securities Data Co., Newark, N.J.
