The Rothschilds Are So Done With the Markets
The family is taking its storied boutique bank private. Minority shareholders are on the spot.
Why is it important to be listed? Even bankers are asking this question. Rothschild & Co. is being controlled by a family that believes it should be privatized. They claim investors don't understand the bank's long-term potential. This is the latest example of stock-market indifference being exploited by private buyers. Wp Enjoy the complete experience. ArrowRight Choose your plan. In the US, the trend in financial firms has been the opposite: Since 1999 when Goldman Sachs Group Inc. was the last Wall Street firm to list, entrepreneurs have been looking to get listed. Boutiques that go public have no problem seeing the benefits. The founders can cash in on their stakes and the equity can be used to pay staff. Because it is difficult to engineer a sale to another financial company, an initial public offering is the preferred route. Rothschild is a more complex company. Concordia, the Rothschild family's holding firm and dominant shareholder, says that the bank doesn’t need to access the equity market to capital and suggests that investors are only focusing on the business''short term earnings'. It is clear that the market is frustrated. Rothschild has done well operationally but it is hard to see the frustration in the market from the share price. At Friday's close, the market capitalization was just 3 billion euros (3.2 billion). The free-float of traded shares is less that half. One solution is a merger with another boutique that brings more scale and diversification. However, such a merger could dilute the Rothschild family’s influence and create a more traditional share register. Rothschild's business is not a good idea. It must pay its senior staff in stock. The main obstacle to Concordia's success will be the minority shareholders. The offer was made when Rothschild stock price and Paris CAC-40 index were at all-time highs. This backdrop makes it seem hardly opportunistic. The minority shareholders are going to be left with a weak hand and no other buyer. Chris Hughes is a Bloomberg Opinion columnist who covers deals. GiftOutline Gift Article