Don’t Miss the Forest With No Trees
Also Uber and shared series trusts.
If you are a bank hired as a lead underwriter of an initial public offering for a forestry company, should you:
The argument for #1 is that, as an IPO underwriter, you are a gatekeeper to the capital markets. Your name is on the prospectus, your clients are buying the stock, and you are putting your reputation at stake on behalf of the company. That is what they are paying you for: IPO fees are so high, not because it is a lot of work to call up investors and sell stock, but because the IPO issuer is renting the reputation of the underwriting bank so that skeptical investors will take a chance on its stock. The bank is vouching for the company, and if it wants to preserve its own reputation — so it can continue renting it out to future IPO issuers — then it had better make sure that the company is one it can vouch for.