These act to tease out the issue price that pretty much equalises supply and demand and minimises the first-day pop and, along with it, the opportunity for kickbacks to underwriters.
Some observers wonder if CSFB is preparing to wriggle off the hook by implying that any abuses were the acts of a few rogue brokers.Sharing the sharesThe main focus of the investigations is the terms under which underwriters allocated shares in IPOs.
Nobody disputes that the underwriters can choose to whom they distribute shares, nor that they may favour clients that give them plenty of business.
Underwriters are said to have set the share price too low in initial public offerings (IPOs), so as to ensure a huge jump in the price when trading began.
Underwriters are paid a percentage of the funds they raise for clients, which is supposed to align their interests.
They have been used more often in recent years as brokers have evolved from merely connecting companies with underwriters to doing things that insurers used to do themselves: assessing clients' needs and structuring complicated bids.
Given that total IPO underpricing during 1999-2000 amountod to $66 billion (based on the difference between the price at issue and the price at the end of the first trading day), the payouts in such cases could eventually be huge.There may be trouble too if underwriters are shown to have known more than they let on when selling securities in firms that later stumbled.
So pharmaceutical companies have to ally themselves with geneticists; commercial bankers with underwriters; hardware-makers like IBM with software boutiques.
Settlements with the 17 other underwriters of WorldCom debt, if structured according to the same formula, could lead to the recovery of an additional $2.8 billion.
New rules issued by the securities regulator were broadly welcomed; the regulator still holds a veto over which companies can list, but underwriters have been given more flexibility for pricing and allocating shares.The Chinese government issued licences to China Mobile and two smaller wireless providers to operate on the country's new 4G network.
The rights issue is unlikely to fail completely, since at worst its underwriters will be forced to buy some shares.
