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MyPrivateBanking Research Brief (July 2011)

Why Private Banking Clients Should Avoid Internet IPOs

Jul. 05, 2011

It is a common practice that the investment banking division and the wealth management division of large banks collaborate to distribute IPO shares among their wealthy individual clients. For instance, Goldman Sachs created a specific investment vehicle to distribute Facebook shares well before the IPO to some of its high net worth clients. J.P. Morgan raised USD 1.2 billion from high net worth individuals for a social media fund, with a minimum investment of USD 250,000.

MyPrivateBanking sees a substantial risk for investors that the mix of the same major players, mechanisms and promises that were seen in the last tech boom eventually leads to the same, disastrous results.

For this brief MyPrivateBanking researched the performance of 10 prominent dot-com IPOs in the last decade; the Top-10 IPO underwriters in the US by number of deals Jan. 1, 1999-March 2000 and the most important social media and Internet IPOs in 2011/2012 and their lead underwriting banks.

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