Cowen Group IPO Bodes Ill for IPO Market

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Cowen IPO Sinks, May Give Pause To Other Lenders

• Summary: Cowen Group (COWN) traded down to $15.88 yesterday from its IPO price of $16. The IPO price itself was significantly below the expected range of $19-21 a share, which it set with underwriters Credit Swisse Group and Merrill Lynch. Cowen's poor reception may bode badly for three other investment banks that have filed for, or plan to file for IPOs: Ryan Beck Holdings Inc., Evercore Partners Inc. and Keefe, Bruyette & Woods Inc. Cowen's business may not be comparable to the others, however, due to its revenue concentration in low-margin trading and growth-oriented investment banking, which make it particularly susceptible to trading conditions and the health of the IPO market.
• Comment on related stocks/ETFs: Cowen's profits declined 78% last year while other investment banks were minting more money than ever. The sales and trading business is suffering from relentless margin compression. According to Bloomberg (full article definitely worth reading), "Yesterday's sale values Cowen at about 0.8 times its 2005 revenue. That compares with ratios of about 1 for Lazard Ltd. (LAZ), the New York-based investment bank that has soared 50 percent since its IPO in May 2005, and Morgan Stanley (MS), the biggest securities firm by market value."