Newport Beach-based Roth Capital Partners LLC saw its market share slip in what has been a key part of the investment bank’s business for the past few years.
Roth saw larger rivals step up their work doing what’s known as private investment in public equity. That’s where investment banks help companies raise money directly from institutional investors rather than doing a secondary public share offering.
Roth did $424.4 million in 27 private investment deals last year, placing it at No. 8, according to Private-Raise.com, a New York-based market tracker of specialized offerings.
In 2004, Roth led the pack with 47 private investment deals worth $676.3 million.
Banc of America Securities LLC and Citigroup Global Markets Inc. led in 2005 with nearly $1 billion in deals each.
Other big names rounded out the top ranks: Goldman, Sachs & Co., Deutsche Bank AG, UBS Securities LLC, SG Cowen & Co. and Tejas Securities Group Inc.
“Big bulge bracket firms are elbowing their way in,” said Aaron Gurewitz, Roth’s managing director and head of equity capital markets, referring to investment banks that get top billing as underwriters on offerings.
‘Second Best Year’
Private investments, called PIPEs in the industry, have been a key source of business for Roth,and other investment banks,with fewer public offerings in the past few years.
Most companies raise $5 million to $20 million in private investments. Roth’s focus is on smaller companies, those with market values of $50 million to $350 million. It will do private investments for companies as large as $1 billion in market value, Gurewitz said.
Even with the slip, Roth’s private investment business was strong in 2005, according to Gurewitz.
“It was the second best year,” he said.
In all, Roth did $762 million in all types of stock offerings in 2005, about the same as 2004 and up 58% from 2003, according to figures from financial research firm Dealogic Holdings PLC.
“We have a very active pipeline in 2006,” Gurewitz said. “I think our PIPE business will be bigger than last year.”
Roth’s average deal size grew last year, expanding by 16% to $15.7 million. The prior year, the average deal was $13.6 million.
2006 Outlook
2006 could be a busy year for private investments, according to Brett Goetschius, executive editor of DealFlow Media Inc.’s PIPEs Report, a Petaluma-based trade publication.
Higher interest rates and their impact on stocks could spur more private investment offerings, he said.
“There also is a growing acceptance by traditional institutions and mutual funds that PIPEs are a legitimate and economical way to raise capital,” Goetschius said.
Last year, the national total for private placements grew 37% to $25.7 billion, according to PrivateRaise.com.
Private investments also seem to have shaken off a reputation as a capital-raising instrument of last resort, Goetschius said.
“Overall, the market is becoming more legitimized,” he said.
