Thomas Weisel Partners, which stubbornly held out from last year’s global settlement between regulators and securities firms accused of publishing tainted equity research, may finally be ready to deal. People close to the firm say that founder and CEO Thom Weisel announced in a partners’ meeting early last month that a settlement was imminent.
San Francisco-based Weisel Partners is one of 12 firms accused by the Securities and Exchange Commission, the National Association of Securities Dealers, the New York Stock Exchange and New York State Attorney General Eliot Spitzer of producing overly positive stock research to support their investment banking businesses. In April 2003 ten of those firms agreed to dole out $1.4 billion to settle the matter. Weisel Partners refused to take part in the deal because regulators, in addition to charging the firm $12.5 million, wanted to characterize its conduct as “fraudulent” in the settlement language -- a label that would invite private litigation that could be far more damaging. The other firm that didn’t enter the global settlement, Piper Jaffray, has since settled with regulators separately. But Deutsche Bank, one of the original ten firms, had to pull out of the deal after discovering employee e-mails that it inadvertently neglected to provide to investigators and has yet to finalize a settlement.
After months of additional negotiation, Weisel Partners apparently has convinced regulators to scrap the fraud reference, paving the way for a deal, say people close to the firm. An SEC official didn’t return calls seeking comment.
A settlement would lift the regulatory cloud that has been hanging over Weisel Partners and mark another step in its long, hard journey back from an extraordinarily difficult period. The famed Silicon Valley financier’s firm suffered badly when the technology boom went bust in 2000. Highly dependent on underwriting IPOs and advising on mergers for technology and other high-growth companies, it turned out a string of money-losing quarters that kept it from regularly paying profit distributions to partners. After several partners decamped for steadier paychecks, Weisel more than tripled partners’ base salaries, to $200,000 annually, to help stem the tide of defections. The five-year-old boutique also closed its London office and laid off some 300 people -- more than a third of its peak workforce of 820 in mid-2001.
Such adversity was alien to the hard-charging, hypercompetitive Weisel. His previous firm, Montgomery Securities, never had an unprofitable quarter from the time he founded it in 1978 through its sale to Bank of America for $1.2 billion in 1997. (Weisel himself made some $120 million from that deal.)
But now the worst appears to be over. Weisel Partners has underwritten 19 IPOs already this year, up from only 15 for all of 2003 and 11 in 2002. The firm has advised on 15 mergers and acquisitions so far this year, up from 14 in 2003 and ten in 2002, according to New York research firm Dealogic. During the first quarter, the firm turned a profit and made distributions to its 64 partners for only the third time since the beginning of 2001, sources say. Privately held Weisel Partners doesn’t disclose profits, but it says that revenue for the first quarter grew by 62 percent, to $79.5 million.
“Every week our pipeline continues to build,” says Ann Akichika, the firm’s chief operating officer for investment banking, who declined comment on negotiations with regulators. Weisel, an amateur cyclist, had embarked last month on his annual sojourn to watch buddy Lance Armstrong compete in the Tour de France and was unavailable for comment.
