Wednesday, December 06, 2006

And you want to be a Corporate Finance Banker in Hong Kong?

One of the things I have learnt while working in a bank as an Oil analyst was that there really is only one fatal mistake you can make. All other mistakes can be made non-lethal, but this one, pretty much guarantees someone's head is gonna roll.

No... It is not recommending a bad stock

No... It is not providing a wrong price target

No... It is not providing predictions of revenue or profits that proves to be false

The biggest mistake you can make in investment banking is getting facts wrong.

Why is it so bad? Because the bank can lose clients and money.

Same thing with being a corporate finance banker.

For example, some larger investment bank wants to do deal. The deal requires the approval of minority shareholders.

As per stock exchange requirements, an independent financial advisor will need to be appointed to give an independent financial evaluation and recommendation to the shareholders.

Together with the details of the deal, the letter to shareholders from the independent financial advisor will be all compiled into a circular for shareholders.

If your numbers are wrong, a deal doesn't get done. Then your clients get pissed, your partnering banks get pissed.

If the deal gets done, it will probably be delayed, and if some adverse market condition were to occur... Say you want to do an IPO. You could have sold the stock at $10 a share, then someone finds something is wrong in your documentation, they halt and delay the IPO, HSI falls 3000 pts, now the client is only going to get $7 per share, and probably needs the over allotment money to support the stock... Ooops...

So. Here's the deal.

Here's the headrolling mistake.

Here's the new date for the deal.

Finally, here's the "report card" from the press.

The question is...

1. Will Merrill Lynch or the company go back to that same Independent Financial Advisor next time?

2. Will any other bank or company?

3. If not, then what?

Thats pretty much all I am going to say about this particular deal. And I expect everyone is praying over there for a continued bullish sentiment in the market. =) ho ho ho


  1. hi, apparently, the mistakes were discovered by an investor, and he did call one of the banker of the financial adviser before escalating his complain to sfc. but unfortunately, he did not listen hence the 2 weeks delay for the reit ipo.

    oh, the investor actually has a thank you letter written by sfc for he has done.


  2. nice!

    Wow... I wonder would the investor step forward. I would love to interview him.

    "The vigilante of finance"!