New platform backed by Fidelity, Goldman seeks to bring IPO market into the digital world

The Syndicate Desk — a longtime fixture in Wall Street banks where IPOs and other large stocks are sold and allocated to investors — has long been associated with traditional methods of doing business such as phone orders and pieces of paper. , even other businesses go digital. .

Capital Markets Gateway LLC is set to change that. Backed by Franklin Templeton, Fidelity Investments, Goldman Sachs Group Inc., JPMorgan Chase & Company and Morgan Stanley, CMG was launched in 2017 by former bankers Robert W. Baird & Co.

Its platform currently provides data and analysis on follow-on stock sales, block trades and initial public offerings, as well as a list of who are the underwriters for each offering. Later this year, the firm plans to expand its offering to enable investors to place orders on computers for IPOs and other equity-capital-market deals, according to chief executive and co-founder Greg Ingram. Can you Who previously used to run ECM at Baird.

When the system is up and running, buy-side firms—of which there are about 100 sign ups—will be able to see what deals are pricing, what the terms are and lead bankers digitally. Enter your orders with them, as long as they have an existing relationship with them.

Once the IPO and other offerings are priced, instead of waiting through phone calls till the next morning to know if they have received any allotments, fund managers can find out electronically the same evening. Huh. They can also see a breakdown of the outstanding commissions on the platform.

(In the past year or so, Goldman, Morgan Stanley and others have launched their own direct-order entry systems to facilitate some IPOs, but they are bank-specific.)

Whether the new platform works and perhaps even bigger if the IPO-market players eventually prove willing to change the way they do business over the years, remains to be seen. But everyone agrees, the system is ready for improvement.

Ben Batory, head of Franklin Equity Group trading at Franklin Templeton, said that for decades he and his team kept track of how many shares he and his team asked for in an IPO — as well as how many shares they received and at what price — on loose sheets of paper. . He and his counterparts at other firms talk about calling several bankers on a deal to make sure their orders are entered correctly. And then they wait. The morning after IPO prices, a banker calls them, telling them how many shares they received, at what price, and how much to charge each of the dozen or more underwriters. It’s up to Mr. Battery, or someone in his shoes, to keep track of it all.

“All these things are ripe for error,” he said. “There can be five deals in a day, and you need to get the right amount, get the right commission, and it’s chicken scratch on a piece of paper on my desk. It’s incredibly challenging.”

This year – the busiest for a US-listed IPO and equity capital markets as a whole – has put the problem in sharp relief. Traditional US-listed IPOs, which do not include special-purpose acquisition companies, or SPACs, have raised nearly $110 billion, surpassing DeLogic’s record for every other full year, while more than $480 billion raised ECM. Changed hands in deals. On an average, around 20 IPOs are priced in a week; In a few weeks this number has crossed 40.

Michael Wilcox, another CMG co-founder who lives in Baird, said, “It used to be that fund managers looked at IPOs and follow-ons. Now they are looking at IPOs, follow-ons, PIPEs. [private investment in public equity], SPAC and crossover investing. The only way to be able to really focus on the investment decision is to use technology.”

This story has been published without modification to the text from a wire agency feed