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Thomas Weisel Fools Skeptics

Its self-underwritten IPO is a hit on the first day of trading.

Wall Street never ceases to amaze, especially when it comes to brokerage IPOs.

On a day when the major market indices are trading deeply in the red, shares of newly public

Thomas Weisel Partners


rose 30% from their $15-a-share offering price.

The San Francisco brokerage sold 6 million shares Wednesday night at the high end of the range. The IPO raised $90 million, of which Weisel received net proceeds of $62.3 million.

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In midday trading, the stock was selling around $19.75, with nearly 2.5 million shares changing hands.

The frenzied trading in Weisel's newly minted stock is certainly not what many were expecting given that the brokerage has had an erratic financial history and lost $14.2 million in the first nine months of 2005 (full-year results haven't been disclosed). The IPO's prospects appeared to take another turn for the worse when Goldman Sachs backed out as an underwriter last month.

Who is lead underwriter on the deal? Thomas Weisel. The other underwriters are Keefe Bruyette & Woods and Fox-Pitt Kelton, two boutique investment banks.

"It is certainly a study in contrasts, if you look at the prospectus,'' says David Menlow, president of the IPO Financial Network, a firm that researches new stock offerings. "It clearly has surprised the Street on what it expected.''

Menlow, whose firm sells research to Weisel, wouldn't speculate on any efforts Weisel might have taken to support the stock. But as a general rule, Menlow says it is bad form for a brokerage to serve as lead underwriter on its own IPO.

"A brokerage firm should not be allowed to underwrite its own deal," says Menlow. "There should be an SEC regulation. The support for an offering can be magnified because it's going to very well placed sources.''

One big winner in the IPO is Calpers, the California Public Employees' Retirement System, which sold 1.15 million shares. Another Weisel investor cashing in on the IPO is Thomas Marsico, the founder of Marsico Capital Management and the Marscio mutual fund family. In the offering, he sold all 62,483 shares he owned.