Hedge funds screaming down the phone, 2.26am emails to the client, threats about defaulting on trades, bankers pulling in all sorts of directions, billions of dollars at risk and a late night “Oh, f---” moment.
Soon after the deal launched, it was apparent that ANZ’s big local investors, including Perpetual and UniSuper, were not going to buy more shares, which sent its bankers scrambling to find offshore buyers and offload stock through retail broker channels.The first, at 12.03pm, indicated demand at various prices and was followed by a call. “Slow start, real money yet to show their hand,” was then ANZ treasurer Rick Moscati’s appraisal in an email to then CFO Shayne Elliott.
The right kind of buyers did not participate in the numbers needed, hedge funds came to play but had their own tactics to deploy, and underwriters knew it would not be in ANZ’s interest to overload the hedge funds. So, the investment banks took $790 million of stock – nearly one in three shares available.Citi took 40 per cent; Deutsche Bank and JPMorgan 30 per cent each.
But hedge funds’ eyes are bigger than their stomachs. They may bid for $250 million of shares, but they typically want to be allocated far less. If the deal is hot and a hedge fund is allocated half its $250 million bid, it walks away happy with a $125 million allocation. If the deal is struggling, it can wind back its allocation request even further.
The head of markets is worried about the balance sheet while syndicate operatives, whose job it is to find investors to buy the new shares, are fretting over the hedge fund clients. And the senior investment bankers – heads of ECM, for example – are seemingly the only ones focused on the corporate client .
The bankers sent a suggested book message to ANZ at first light on Friday, leaving little time for sleep. ANZ shares began trading, and the underwriters would spend the following few days managing the shortfall.Junior bankers have to be good at two things: Excel spreadsheets and skirting mistakes. Trying to track a deal like ANZ’s – three trading desks, a big book, hedge fund games – must be a nightmare.
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