Imagine for a moment that you’re an equity salesperson (don’t worry, this won’t take too long). Your bankers have worked for years and your ECM team for months to bring an IPO issuer to market. Your syndicate manager has got a real feel for where the market is. And the stock could be just what your client needs. Do you pick up the phone?
Let’s think it through for a second.
The market is volatile — there’s a budget to pass in Ireland, and who knows what speeches senior German politicians are about to give? There’s no clear sign that the deal is going to fly: as far as you can tell, the IPO story is a solid one but it’s early in the process and orders are only just dribbling in.
If you make that call to one of your best clients, what exactly are the benefits? Thanks to the pre-agreed economics on the deal — and the abandonment of the designation system that for a while used to serve the market pretty well — it’s not going to make you any more commission.
And what if the deal fails? Your client is going to be none too happy that you sold him a pup. Think of all those future commissions gone. And come review time, will your head of sales be worried that you didn’t take any orders for a deal that didn’t happen? Come to think of it, nowadays who gets pulled up for not making a call even if the deal does happen?
Yep, now you think about it, there are plenty of more profitable ways to spend your time. Bear that in mind next time you hear how another IPO got pulled because of "market conditions".