Shares in publicly traded investment banks haven’t fared well so far this year. Investors are betting that Moelis & Company, a seven-year-old boutique founded by a veteran deal maker, will do better.
Moelis priced its initial public offering at $25 a share on Tuesday, a dollar below expectations. The firm reduced the number of shares that it planned to sell, raising $162.5 million.
At $25 a share, the firm was valued at about $1.3 billion.
The pricing of the offering below its expected range suggests that not even a strongly performing investment bank can escape the chill that has entered the I.P.O. market, which had flown high until recently. Many companies seeking to go public, particularly in the formerly highflying technology sector, have stumbled in their market debuts in the last few weeks.
And while boutique banks shone in 2013, they have suffered a bit more recently. Shares in Evercore Partners are down about 17 percent this year, valuing the firm at $1.6 billion; those in Greenhill & Company have fallen about the same percentage, giving that bank a market value of $1.36 billion.
Now Moelis & Company will test whether investors believe it is different when it begins trading on the Big Board on Wednesday, under the ticker symbol “MC.â€
Founded and run by Kenneth D. Moelis, the investment bank has become one of the top advisers in mergers and corporate reorganizations. Its founders sought to expand quickly: after just over six years of operations, the firm employed 317 bankers, 86 of them managing directors.
It fulfills a long-held dream of Mr. Moelis, who climbed through the ranks of Drexel Burnham Lambert, Donaldson Lufkin & Jenrette and then UBS while assembling a gold-plated client list, including Hilton Hotels and Anheuser Busch.
But he left UBS after six years amid clashes with the Swiss bank’s management in Zurich, quickly forming his own shop with colleagues like Navid Mahmoodzadegan and Rick Leaman.
Last year, Moelis & Company was ranked 15th in Thomson Reuters‘ list of top deal advisers worldwide â€" its best-ever showing â€" having worked on 109 deals worth $101.4 billion. That was two spots higher than Evercore Partners, which was founded more than a decade earlier, and several higher than Greenhill & Company, which didn’t crack the top 25.
(It is off to a slower start this year. As of Tuesday, the firm is ranked 27th worldwide, trailing its older rivals.)
And the firm has racked up a number of high-profile assignments. It and Rothschild were the sole advisers on one of the biggest mergers of last year, the $35 billion union of Publicis and Omnicom, and it played roles in the sale of H.J. Heinz and NYSE Euronext.
That success has translated into profits. Moelis & Company reported $70.2 million in net income last year, almost doubling what it earned in 2012. By contrast, Evercore earned $53.3 million and Greenhill pulled in $46.7 million.
Going public has always been part of Mr. Moelis’s plan. Part of what lured many bankers to the firm was the lucrative stock compensation packages, giving them shares that they hoped to sell in an I.P.O. someday.
The offering will give them that long-awaited payday. The investment bank will pay out the vast majority of its expected proceeds, (about $141 million), to partners.
Even after going public, however, the firm will remain firmly under the control of Mr. Moelis. Under the terms of the offering, he will control the all-important Class B shares of Moelis & Company, giving him roughly 97 percent of the voting power.
That’s in addition to a number of perquisites he already enjoys: The firm covers the cost of his private jet for work trips and pays him what he would have spent on hotel costs in New York City â€" he is based in Los Angeles â€" even though he owns an apartment in the Plaza Hotel.
The offering was led by Goldman Sachs and Morgan Stanley, with Moelis & Company itself playing a smaller role.
