Moelis & Co. Rises After Smaller-Than-Expected I.P.O.

When Moelis & Company first disclosed the price range for its initial public offering less than two weeks ago, the market for newly public stocks was on a tear.

But when it came time to actually price the stock sale on Tuesday, the environment had changed substantially. And given the choice, executives at the boutique investment bank opted to price their shares at $25, a dollar below expectations, to help ensure the stock traded well. (They sold fewer shares as well.)

The strategy seems to have worked. Shares in Moelis & Company were trading 5.6 percent above the offer price by midday on Wednesday, at $26.40. That values the advisory shop at about $1.4 billion.

The firm’s founder, Kenneth D. Moelis, told DealBook in an interview on Wednesday that reducing the size of the offering was a necessity.

“We thought that’s probably where the world had moved,” he said. “We tried to think, ‘At what price and what size can we assure the people who are putting their faith in us that they will make money?’”

Just getting the I.P.O. off the ground was a long-held goal for Mr. Moelis and his team â€" “One of those things in life you get to do once,” he said â€" as they built out their firm nearly seven years ago.

Having a publicly traded stock will give the firm another tool for recruiting, because prospective new employees can more easily measure how much a Moelis & Company job offer that includes stock is worth versus a similar bid from another publicly traded firm.

Though the firm will be publicly traded, new investors won’t have much say in how the firm is run, because Mr. Moelis will control about 97 percent of the voting power. The banker steadfastly defended the corporate governance structure as one necessary to protect investors and the business.

Part of the reason behind the staggering amount of control is technical: Mr. Moelis controls a special entity on behalf of his partners that holds more powerful Class B shares, which carry 10 votes each. But he also made no apologies for maintaining such a tight grip.

“If we ever had a control fight, I don’t believe would win a lot of business,” Mr. Moelis said. “It’s my largest investment in the world, and I’m protecting it.”

Nor did he think that other perquisites were out of line. He noted that he bought a private jet with his own money, so if he needs to use it for firm business â€" meeting with a potential client, for example â€" it’s only fair to receive reimbursements.

And as for receiving reimbursements for what he would have paid in hotel fees when he visits New York, despite owning an apartment in the Plaza Hotel, Mr. Moelis said those were fair, too. “I don’t know of a hotel that’s as cheap as what the firm is reimbursing me,” he said.

Now that his firm is public, Mr. Moelis plans to continue building the investment bank across the world and across various industries. And he thinks that the environment for the firm’s mainstay mergers business will remain favorable, though it won’t jump anytime soon.

“I don’t think it’s going to spike,” he said. “I think it’s going to be a slow and steady improvement in the market, and someday we’ll have a full cycle.”