(December 2) – “On Tuesday, market darling JDS Uniphase took one of those swan dives that makes this market a thrill ride for the Street,” writes Andrew Willis in today’s Globe and Mail..
“As the dust settled on a terrible day for technology stocks that saw JDS knocked back $37 to $337 on the Toronto Stock Exchange, it was time for a gut check for the folks at CIBC World Markets.
The investment dealer guided JDS Fitel into Uniphase’s arms earlier this year, and as as part of that transaction, it sold stock for the company’s largest shareholder, Furukawa Electric of Japan. Now Furukawa was back, selling another 1.8 million JDS shares. Did CIBC want the business?
“The risks in saying yes were huge. Furukawa wanted a bought deal: It would sell the JDS stock to CIBC, which would then take responsibility for what happened next. If tech stocks continued to tank, this financing could rip apart the dealer’s balance sheet.
And how does one read this market? The buying that had lifted JDS last week reflected retail interest. Was there the institutional following needed to soak up more than $600-million of stock?
“In a different age, CIBC may have decided to share the potential risks, and rewards, of this deal. It could have called a few rivals and formed a syndicate of dealers to move JDS. As the lead house, CIBC might have ended up with 40 per cent of the fees. But given the dealer’s familiarity with JDS and its investor base, and the hog-the-puck mentality that prevails on the Street, CIBC opted to go it alone.
“Early in yesterday’s session, CIBC moved the entire JDS block to U.S. institutions. As the day got rolling, tech stocks rallied, and JDS finished the session unchanged at $337, to the joy of CIBC.
“When we get around to recording the year’s most influential deals, CIBC’s work with JDS will stand out. Alongside this deal, we’ll look back at Bunting Warburg Dillon Read’s decision to fly solo on a $642-million offering of Abitibi-Consolidated stock, and a $413-million Inco bought deal that was underwritten by just two shops, Credit Suisse First Boston and RBC Dominion Securities.
For more please see: