Do you want to be buying what Kenneth Moelis is selling?
The Wall Street veteran, who has helped companies from HJ Heinz Co. to NYSE Euronext decide the best time to sell, is taking his seven-year-old Moelis & Co. public today. He’s seeking a valuation of as much as $1.58 billion for the New York-based investment bank, while also structuring the sale to ensure he retains control of the firm.
Ken Moelis, 55, and his partners will reap as much as 80 percent of the initial public offering proceeds in one-time payments, the prospectus shows. Instead of funding growth, investors are being asked to reward Moelis’s rainmakers, said Jeff Sica, president of Sica Wealth Management LLC. While the firm was initially offering shares at a discount to Evercore Partners Inc. and Greenhill & Co., that gap disappeared as shares of both tumbled in the past 10 days.
“You look at this IPO as cashing out,” said Sica, whose Morristown, New Jersey-based wealth-management firm oversees $1 billion in assets. “They’re only as good as the environment they exist in, so bringing in more capital won’t make these models more effective.”
Moelis is scheduled to price the IPO tonight, raising as much as $212 million by selling 7.3 million Class A shares for $26 to $29 apiece, according to its latest regulatory filing. Ken Moelis will hold 97 percent of the voting rights at the company by owning a majority of Class B shares, which are given 10 votes each.
Andrea Hurst, a spokeswoman for Moelis, declined to comment. The IPO will allow Moelis to expand its business by using stock-based compensation to attract employees, according to the filing.
When Moelis initially set its terms April 4, the company was seeking a valuation as high as 28 times 2013 earnings of $55.7 million, which are adjusted to reflect the higher tax rate that Moelis is likely to pay as a public company, according to data compiled by Bloomberg. While that was a discount to Evercore and Greenhill when the terms were filed, it has since narrowed with shares of both tumbling about 10 percent through yesterday, the data show.
Greenhill rose 0.8 percent to $47.76 as of 9:53 a.m in New York today while Evercore gained 1.4 percent to $49.93.
Growing Share
Independent investment banks like Moelis, with a focus on takeover advice and few other business lines, offer a way to profit from a pickup in dealmaking, said Kenneth Leon, an analyst who covers the financial industry for S&P Capital IQ.