ASB Securities/Tim Preston

[Steve]

If I may quote: At ASB Securities - the firm organising the float of a private equity fund called StoreFund - managing director Tim Preston is fuming that "IPO fatigue" is a "media beat-up" and "a crock". "Good, attractively priced IPOs will go out the door. There is huge demand for them."

Has either ASB Securities or Tim Preston made any public comment on why the float went so horribly wrong?

[Speculator]

There was a Maori in charge.

[mikescott]

StoreFund & ASB: How not to manage an underwrite

In days gone by, financial markets used to rely on huge amounts of trust.

Brokers on the New Zealand Stock Exchange operated on the principle "my word is my bond."

Sceptics may suspect this mantra must have existed in name only, such is the current reputation of market participants, but they would be wrong.

Before computerised screen trading, in the days of open outcry, floor-trading brokers verbally agreed to do deals with each other. When one broker was organising a float (or IPO as they are more commonly called these days) the other brokers would initially give verbal commitments to take stock.

Even today, when brokers do deals with institutions, the transactions occur verbally and over the phone. The paperwork happens later. Both parties need to know they can trust each other.

Invariably mistakes were made and there were disagreements as to who was at fault but they were resolved amicably. Occasionally some dishonest soul entered the system but he/she generally didn't last long as everyone relied on everyone else's honesty.

Chalkie reckons this all started to change around the time of the 1987 crash. All of a sudden some parties who subscribed to the "trust" system were going broke.

Nothing tests honesty more than economic hardship. There are still individual brokers operating in the New Zealand market who were shareholders in firms that went bust owing the other brokers lots of money. Some people have long memories.

Nowadays everyone is less trusting. When various parties become involved in a transaction their lawyers need to ensure everything is locked up tightly in case one of the parties changes its mind or goes back on its word.

One obvious place where the legal aspects need to be tight is the tricky area of underwriting - ie, when someone seeking to raise money for a deal pays someone else a fee to "underwrite" the transaction, so there is surety the deal will proceed rather than being delayed while the arduous process of raising money from the public takes place.

Several weeks ago (The Independent 16 June) Chalkie was mildly critical of a $25 million float of a new investment fund called StoreFund.

StoreFund intended to invest in retail businesses and take various fees from investors for doing so. Its foundation investment had already been made with the purchase of the BBQ Factory chain.

Because the vendors of the BBQ Factory would have needed to know the fund had the wherewithal to pay for the deal, the managers and promoters of the StoreFund had gone to a broker - ASB Securities, a subsidiary of ASB Bank - and got the deal underwritten.

Chalkie reckons underwrites are funny things. If the deal being underwritten is good, then being paid to underwrite it is money for old rope. If the deal is bad, the fee is nothing compared to the whole wardrobe of shirts you can lose when it craps out.

The skill in underwriting equity deals is the same skill as insurers need when underwriting insurance risk: you need to be able to choose good deals from bad.

If you're looking for an underwriter, you need to look for two things: paying as low a fee as possible and picking an underwriter who can, and will, pay up if everything turns to custard.

In StoreFund's case it seems both sides have lacked the necessary skills. ASB backed a pup that couldn't raise the necessary money and StoreFund's manager/promoters screwed up on their choice of underwriter as ASB appears to have pulled the plug when the going got tough.

StoreFund's float has been cancelled and the official word is that it's a "mutual decision" on both sides. Yeah right!

The StoreFund guys are very professional seasoned market operators. Chalkie doubts they would have gone to the trouble and expense of getting an underwriter in the first place if they intended letting their underwriter off the hook if things went sour.

Chalkie could understand the independent directors perhaps worryin

[bongo66]

The jokes at ASB branches amongst staff re the BB "purchase" are becoming legendary.

B

[MeNoBatty]

Presto didnt listen to his own advice. Storefund was a c r a p, money for the boys, expensive IPO. Fortunately, it didnt take long for the 'comentators' in the press to alert the public to this. The Fay Richwhite lackeys can no longer get away with what they did in the past.

[coge]

Well, MeNoBatty, the FH lackeys as you call them have got away with it, as they have effectively foisted bbqf onto ASB.

I think this speaks volumes for ASB. Banks should stick with their knitting.

-coge

[MeNoBatty]

True, coge, true. However at least it is not joe public, but some morons at ASB that have the egg on face. Wonder if heads will roll? I suspect ASB will take a bath on this c*ck up. Bonus time will be a bit slim for some. Totally misread public sentiment.

[willy_wonker]

From RMG to BBQ.

Doesnt go down well with investors.

[Steve]

Has anyone else noticed that neither ASB Securities nor Tim Preston are quoted for "market opinion" is the daily press any more?

[mikescott]

Yes. But that's because Preston and his merry Storefund/RMG-pushing advisors now work for Auckland Spa and BBQ Bank. :D

[tim23]

Hes still on Newstalk ZB each evening and I reckon hes okay!

[bongo66]

Wairau Park ASB has a BBQF right next to it...:D

How conveinient:)

Does that make it the BBQFASB? Bongo

[willy_wonker]

You get one free BBQ set when you open a new ASB account. :D

[mikescott]

No ...you get to soak in one of the spa pools in a special room with one of their comely tellers! [:p]

Then you get served with a sausage, fresh from a BBQ in the staff room. :D

Then, the punishment - Tim Preston walks in to talk you into buying more RMG shares. [xx(][xx(][xx(]

[Lawso]

Good one, Minder. The best laugh I've had today and the only laugh I've ever had out of RMG. [B)]

[warthog]

quote:Originally posted by Speculator

There was a Maori in charge.


I may be late getting around to reading this thread, but what the fück has this got to do with anything??

[duncan macgregor]

Your comments are equally intelligent macdunk

[Steve]

quote:Originally posted by warthog


quote:Originally posted by Speculator

There was a Maori in charge.


I may be late getting around to reading this thread, but what the fück has this got to do with anything??


Everybody else chose to ignore Speculators comment...
[xx(][xx(][xx(]

[mikescott]

Joke's over. Let's leave ASB and Tim Preston alone.

I guess until he recommends RMG again. :D:D:D:D