Title: How%20Goldman%20Sachs%20assists%20Bank%20of%20Communication%20(BoCOM)%20during%20the%20IPO%20process
1How Goldman Sachs assistsBank of Communication
(BoCOM)during the IPO process
2Member List
- Tse Po Man, Polly 033130
- Wong Wing Yan,Wing 033138
- Yip Wing Man,Tobi 033140
- Lai Pak Hei, Tommy 033146
- Siu Kin Fai, Eric 033172
3Agenda
- Introduction of Investment Banks Industry
- Background of Goldman Sachs
- Case Study BoCOM
- -- The Duty of Goldman Sachs
- Prospect
4Introduction of Investment Banks Industry
Polly
5What is Investment Bank ?
- assist corporations in raising funds in the
capital markets - strategic advisory services for mergers,
acquisitions and other types of financial
transactions - best-known financial services such as Goldman
Sachs, Morgan Stanley.
Polly
6Role of modern investment banks - Today's Society
- Underwriting and distributing new security issues
- Offering brokerage services
- Providing financial advice
- Providing financial security research
- Market-Making, in particular securities
Polly
7Size of industry
- revenue increased 52.8 billion for 3rd year of
2005 - This was up 14 on the 2004 but 7 below the 2000
peak.
Polly
8Polly
9Competition and challenges for Investment Banks
- Direct purchase by institutional investors from
issuers - more corporations establish in-house groups ? to
perform activities traditionally done by
investment banking firms
Polly
10Current trends of the business
- the boundaries between commercial banks
investment banks has blurred - the need for capital in secondary trading has
increase. - Investment banks spend a lot of money on
designing and developing new technological and
trading platforms.
Polly
11Goldman Sachs
Tobi
12Goldman Sachs
- Founded in 1869, it is one of the oldest and
largest investment banking firms - Operate in 23 areas
- New York, London, Tokyo, Hong Kong and other
major financial centers around the world.
Sale in different Areas (in )
Tobi
13Goldman Sachs
- Its activities are divided into three segments
- Investment Banking,
- Trading and Principal Investments
- Asset Management and Securities Services
Financial Performance in 2005 (in million)
Tobi
14Investment Banking
- Divided into two components
- Financial Advisory
- advisory assignments with respect to mergers and
acquisitions, divestitures, corporate defense
activities, restructurings and spin-offs - Underwriting
- public offerings and private placements of
equity, equity-related and debt instruments.
Tobi
15Competitors
- CSFB
- Merrill Lynch
- Morgan Stanley
- JPMorgan Chase
- Bear Stearns
- Charles Schwab
- CIBC World Markets
- Citigroup Global Markets
- Credit Suisse (USA)
- FMR
- Lehman Brothers
- UBS Financial Services
Tobi
16Competitors
- According to the sale revenue(2005),
- top three investment banks are
- Merrill Lynch,
- Morgan Stanley
- Goldman Sachs.
Tobi
17Sale
Tobi
18Latest operation
- 14/04/2006
- Upgrade Maonshan Iron Steel
- made the shares surged more than 13 percent
(gained 13.64) - 04/04/2006
- Upgrade Bank of East Asia
- surging 9.23 percent Thursday.
Tobi
19Latest operation
- 06/04/2006
- Cooperate with Morgan Stanley
- Shimao Property Holdings
- Morgan Stanley has been invited to co-arrange the
sale with Goldman Sachs.
Tobi
20Latest operation
- 03/04/2006
- IPO of Bank of China
- hiring Goldman Sachs, UBS and BOC International
(Holdings) to handle the planned June sale.
Tobi
21Duty of Goldman Sachs
- Origination
- Underwriting
- Distribution
- IPO
22Job Duty --- Origination
- Provide advice
- Analyze the feasibility
- Amount of money to raise
- Type of financing needed
23Job Duty --- Origination
- Provide advice (cond)
- Characteristics of securities to be issued
- Best sale date
- Prepare the official sale documents
24Job Duty --- Underwritting
- Investment banker guarantees to buy the new
securities for a fixed price - Risk
- Securities may be sold for less than the
underwriting syndicate purchased them
25The brief time table of IPO of the BoCOM
24/09/04 27/02/05
08/07/2003
15/03/2004
23/06/2004
23/09/04
28/02/05
30/05/2005
01/06/05 10/06/05
27/04/05
12/05/2005
23/05/05
12/06/05
13/06/05 16/06/05
18/06/05
23/06/05
2623/06/2004 HSBC would use RMB 8.2billion
to buy 20 share of BoCOM
- HSBC would become the only one investor from
abroad. - HSBC would use RMB 8.2 billion to buy 20 share
of BoCOM
ERIC
2724/08/2004 Shares opened to BoCOM staff
for buying
- BoCOM
- Allowing its employees
- buy the shares of the company.
- motivation
ERIC
2824/09/04 - 27/02/05 Documentary submissions
- With the help of Sponsors and Consultants (like
Goldman Sachs) - Submit documents like
- Draft of the profit forecast memorandum
- Draft formal notice of listing
- Draft securities application form
- Draft document of title or certificate of the
securities
2928/02/05 Submitting formal application to HKEx
for listing
- Formal application was submitted
- to the Hong Kong Exchanges and Clearing Ltd.
ERIC
3027/04/05 Enter the Hearing procedure by Listing
Committee
- PricewaterhouseCoopers
- Provide assistance during the hearing procedure
of the Bank of Communications
3123/05/05 Approved from the Listing Committee of
the HKEx
- The hearing for the listing application of the
BoCOM - Formally approved!
3201/06/05 10/06/05 Global Road shows
- Holds more about 90 road shows
- Meets more than 500 global investors in Hong
Kong, Singapore, USA, Europe and Japan - Promote their companys securities
3312/06/05 Decide only issue H share in Hong
Kong only
- With the advise from the investment banks like
Goldman Sachs - Issue H share only in Hong Kong
- Give up issuing A share in Shanghai Stock Market
3412/06/05 Decide only issue H share in Hong
Kong only
- A share stock market in Shanghai weak
- Cannot afford the vast amount of shares of BoCOM
- Worst scenario
- Undersubscription !!!
3513/06/05 16/06/05 Public Offering
- Started IPO on 13th of May
- Initiated 5.8 billion of shares
- 0.29 billion of H shares
- The price was set within 1.95 and 2.55 HKDollar
- The maximum fund ? 12.64 billion
- Deadline ?16th of June.
- The price was confirmed on 18th of June
- Strengthen the bank capital and support the
development of the bank.
3618/06/05 Price determination
- One of the most important parts of IPO.
- If the price is lower average ?the shareholders
will lose - If it is too high? buyers may lose the interest
on buying the securities - ?Goldman Sachs will need to hold all the
rest of the BoCOM shares. - The price range ?buyers acceptableness
- Price ? first set by Goldman Sachs
- ?finally by the top management level of
BoCOM.
37- Base on the following situation to determine the
price. - The price determination is based on the following
principles - the P/E ratio and P/B ratio
- the benefit of old shareholders
- the benefit of new shareholders
- the benefit of China and the industry of China
banking - the stability of the market after listed on board
3823/06/05 Listing on Main Board
- Code number 3328 BoCOM
- The stock exchange market of Hong Kong
- The price HK 2.8.
- Higher than the listed price 13
- 205 times in individual investors oversubscribed
- 27 times in firm investors oversubscribed
- IPO?Fourth highest in the history of Hong Kong
3912/05/2005 BoCOM gave up A share to be
listed on board
- BoCOM gave up A share to be listed on board
4030/05/2005 Confirm the date of Road Show
- BoCOM confirm the date of Road Show.
- In the U.S., Europe, Japan, Singapore, and Hong
Kong.
41Prospect of Investment Bank
- China Market
- China Company list on HK main board
- Cooperate with competitors
- Shimao Property Holdings.
- Morgan Stanley has been invited to co-arrange the
sale with Goldman Sachs - Online Trading Platform
Wing
42Current Price of BOCOM
Wing
43Current Price of BOCOM
Wing
44BOCOM Financial Report 2005
- Billion (RMB)
- Total Asset 1,423 24.43
- Net interest income 31.59 25.4
- Net handling charge 2.10 25.39
- and commission income
- Other income 1.45 33.3
- Earning before interest 12.84 65.7
- Tax 3.60 -41.4
- Net Profit 9.24 476.6
Wing
45Prospect of BOCOM
- Target Price
- Goldman Sachs
- 4.38 ? 5.22
- Merrill Lynch
- Suggest sell it
- 4
Wing
46Conclusion
- Investment Bank
- Goldman Sachs
- Case Study
- BOCOM
- Prospect
- Investment Bank
- BOCOM
- How Risky is IPO Investing
Wing
47The End