WASHINGTON -- Even though the market for initial public offerings has improved since its nadir in 2003, investment banks certainly aren't partying like it's 1999.
Gone are fancy dinners at the conclusion of every routine stock offering. Ditto to long weekends golfing in Scotland or lounging near the pool in Mexico with clients after an IPO closes. And newspaper advertisements boasting about an IPO's completion are still being used, but much less so than before.
Cost-cutting efforts that went into effect after the Internet-stock bubble burst in 2000 are lingering and in many cases may never be reversed, say investment bankers.
"As part of going public in the 1990s, every company or investment bank was trying to outdo the other in terms of extravagant celebratory events that probably went hand in hand with the exuberance in the market," says Wade Massad, a managing director at KeyCorp's (NYSE: KEY) KeyBanc Capital Markets in Cleveland. "The days of long weekends in Cabo San Lucas are probably gone from the $75 million IPO in the same way that ridiculous valuations are gone from the marketplace. I think you're seeing celebratory events that are more in line with appropriate valuations in the marketplace."
Massad and others said so-called closing dinners still take place, but entire weekends devoted to worshipping the completion of an IPO have become rare indeed. Although increased regulatory scrutiny of excessive gift-giving and entertainment by investment banks has helped bring about the change, bankers also are adhering to stricter spending discipline in the wake of a string of bad years for business.
A sign of continued belt-tightening: Tombstone advertisements, the IPO announcements placed by stock underwriters in newspapers, no longer are de rigueur for every deal, despite improvements in the market.
Goldman Sachs Group Inc. (NYSE: GS) has stopped placing tombstone ads firmwide, and several other Wall Street firms hold off from advertising individual deals, preferring instead to take out broader ads occasionally to trumpet all the deals they have done in a particular sector or time period.
While the number of ads may increase as deal flow recovers, they might not keep pace with any huge resurgence in the IPO market, say bankers.
Meanwhile, the continuing trend toward IPOs that feature more than one lead underwriter is changing the way investment banks can publicize their completed deals, even among the ones that still run ads. Tombstone ads typically featured investment-bank logos prominently, and it is difficult for two or more rival banks to comfortably share advertising space.