THE independent financial adviser and capital markets specialist STJ Advisors has a rather compelling sales pitch for companies, such as Saga or Card Factory, wishing to list on the stock market.
STJ pitches itself as the company’s true friend in a world of complexity where the bulge bracket banks, the only ones capable of distributing the shares that will be issued in any deal, are mercenaries who charge high fees and have a natural proclivity to wish to look after the institutional investors who are their clients.
In sales documents leaked to City A.M. a few years ago, STJ accused the banks of talking down investor sentiment in a bid to drive lower valuations for companies that were about to float.
This created tension, but as the new issues market picked up in the past couple of years, it did nothing to put off groups, especially financial sponsors, from hiring STJ’s services.
Now, as shares in a number of recently floated companies struggle below their issue price, including Saga, Card Factory and AO World (Rothschild was the independent adviser in this case), some of the City’s more influential bankers are pointing the finger (anonymously, of course) at STJ’s role in particular and asking whether it is partly responsible for deals being ruined or not going according to plan.
STJ’s role on Saga was especially irritating to the long list of banks. First, they ran a competitive process to select the banks on behalf of the client, making them do a lot of the leg work before making any appointments. They then encouraged banks to value Saga as a consumer stock with a high rating when many of the banks argued their insurance analysts were better equipped to research the group since 80 per cent of its profits come from that activity.
Bankers say that right until the bitter end, STJ’s John St John was trying to price the issue higher than the eventual 185p, which came at the bottom of the range. Even at this price, it has struggled to trade above issue price, leaving 200,000 or more Saga customers nursing early losses and basically guaranteeing a barrage of bad publicity. Heaven knows how the market would have reacted if STJ had got its way, they say.
Bankers talk of STJ’s tactics of trying to “divide and conquer” the banking team. Now there is even speculation bankers might get together to boycott deals on which STJ have been brought in to act. That’s a difficult thing to pull off in such a competitive market, but the bankers’ anger is reaching boiling point.