Moelis bounces from reduced issue price

Shares in Moelis & Co, the boutique investment bank rose 8.8 per cent on their market debut, after last-minute investor concerns forced it to shrink the size of its share sale and cut the price of the deal below its expected range.

Moelis sold 6.5m shares at $25 each, down from the 7.3m shares it had hoped to sell between $26 to $29. The shares traded as high as $27.22 on opening of trading on Wednesday

At the IPO price, Moelis was still at a slightly higher multiple to peers Lazard and Evercore based on analysts’ forecasts for 2014 and 2015 earnings. Investors worried over some of the assumptions made in productivity projections for its managing directors who are responsible for bringing in the bulk of its business.

The $163m IPO was the latest to come under pressure on the US market after a sharp correction in high-flying sectors such as internet and biotechnology led to greater risk aversion among investors.

The public offering was the third this week to fall below the range sought by the issuer and comes as four deals were either delayed or postponed last week.

The IPO caps a seven year journey back to the public markets for Ken Moelis, a Wall Street veteran who quit as head of UBS’s investment bank to launch the Los Angeles company with top lieutenants Navid Mahmoodzadegan, Jeffrey Raich and Rick Leaman.

The company is valued at $1.36bn with the approximately 35 per cent owned by Mr Moelis and trusts affiliated with him worth $387m.

Mr Moelis will retain a firm grip on the company through a dual-class share structure that gives him and his senior staff shares carrying 10 times the voting rights of other shareholders.

The new listing is also the first among boutique advisory firms in eight years after its rivals Greenhill, Evercore and Lazard went public between 2004 and 2006. Mr Moelis launched his firm just on the eve of the financial crisis, which left dealmakers scrambling as transactions dwindled.

But the sector has enjoyed a return to form during the past year, with mergers and acquisitions in the US returning to near pre-2006 levels. The smaller, advisory-only investment banks have absorbed a larger proportion of the overall fee pool, reflecting the fact that many senior bankers left established Wall Street firms to join boutiques.

Moelis has been active in the run-up to its IPO, advising Laclede on its $1.6bn takeover of the Alabama Gas Corporation, and Classified Ventures on its sale of Apartments.com for $585m.

Its shares will begin trading on the New York Stock on Wednesday using the symbol ‘MC’.

Goldman Sachs and Morgan Stanley, which led league tables for bank mergers and acquisition activity in 2013, are underwriting the offering.