tuesday, december 12 th, 2006 discussion on equity capital markets chris christina principal (612)...

Tuesday, December 12th, 2006

DISCUSSION ON EQUITY CAPITAL MARKETS

Chris ChristinaPrincipal(612) [email protected]

Elissa KlueverAssociate(612) [email protected]

2

PIPER JAFFRAY MANAGEMENT COMMITTEE

Andrew DuffChairman & Chief Executive Officer

Tom SchnettlerVice Chairman & Chief Financial Officer

Todd FirebaughChief Administrative Officer

Jim ChosyGeneral Counsel

Ben MayHead of High -Yield & Structured Products

Bob PetersonHead of Equities

Frank FairmanHead of Public Finance Services

Jon SalvesonHead of Investment Banking

Capital Markets

Institutional Sales & Sales TradingTrading

Research

3

CORPORATE & INSTITUTIONAL SERVICES

Investment Banking and Equities Groups

Equities

Equity Capital Markets

Convertible Originations

Corporate & Venture Services

Capital Markets

Institutional Sales & Sales Trading

Trading

Distribution Research

Investment Research

(Equity &

Fixed Income)

New Industries Alternative Energy Business Services Industrial Growth

Existing Industries Consumer FIG Health Care Technology

Investment Banking

4

EQUITY CAPITAL MARKETS TEAM

Organization ChartChad Abraham

Head of Equity Capital Markets

Origination

John Baumgartner

PrincipalConsumer & FIG

Steve Schmidt

Vice PresidentTechnology

John Crowther

Associate

Execution

Chris Christina

PrincipalConsumer & FIG

Neil Riley

Vice PresidentHealth Care & Technology

Greg Klancher

Associate

PIPEs / RDs

David Stadinski

Managing Director

Elissa Kluever

Associate

Jonathan Jewett

Analyst

Maura Stoltz Hasan

Executive Assistant

Eric Helenek

Vice President

Chad Huber

Analyst

Chris Christina

Principal

5

Initial Public Offerings

EQUITY CAPITAL MARKETS

• An initial public offering (IPO) is when a private company sells its stock for the FIRST time in the public markets

• 146 IPOs have been completed in 2006, raising nearly $33 billion in capital

• Piper has completed 28 IPOs in 2006, raising over $4 billion in capital

• The average number of IPOs completed since 2000 has been 163, with a high of 373 completed in 2000 and a low of 70 completed in 2002

Types of

transactions

completed

through the

Piper Jaffray

Equity Capital

Markets desk

Type of Transactions Completed on the Equity Capital Markets (ECM) Desk

6


Follow-on Offerings • A follow-on offering is when an already public company

sells its stock, either primary shares or shares from selling shareholders, in the public markets

• 457 follow-ons have been completed in 2006, raising nearly $92 billion in capital

• Piper has completed 43 follow-ons in 2006, raising over $7 billion in capital

• The average number of follow-ons completed since 2000 has been 416, with a high of 520 completed in 2004 and a low of 346 completed in 2002

Types of

transactions

completed

through the

Piper Jaffray

Equity Capital

Markets desk

Type of Transactions Completed on the Equity Capital Markets (ECM) Desk

Additional Types of Offerings – (Follow-on Offerings)

• Underwritten Shelf Takedowns

• 144 Block Trades

• PIPEs (Private Investment in Public Equity)

• Registered Direct Offerings

7

Traditional Follow-on

November 8th, 2005

BROAD DEPTH OF EQUITY OFFERING ALTERNATIVES

There is a Growing Continuum of Offering Alternatives for Equity Issuers…

Traditional Follow-on Registered Direct (RD) Underwritten Shelf Takedown Bought Deal

Initial Public Offering (IPO) Private Investment in Public Equity (PIPE) Block Trade (Rule 144 Institutional)

$64,687,500

Initial Public Offering

May 6th, 2005

$97,232,500 $44,845,338

Bought Deal

June 14th, 2006

$40,089,000 $17,710,000

Traditional Follow-on

May 25th, 2004

Rule 144 Block Trade

August 26th, 2004

$54,740,000


June 25th, 1999


May 1st, 2000

$57,960,000 $12,000,000

PIPE

August 9th, 2006

$16,615,932 $95,737,500

Rule 144 Block Trades

August/Sept 2005

Bought Deal

June 15th, 2006

$120,000,000


January 28th, 2005

8

Piper Roles


• Sole-Bookrunner: ECM desk functions as the lead manager on the deal and is responsible for coordinating the roadshow, building indications of interest, pricing the deal, allocating stock, billing & delivering the stock offered in the issue and stabilization in the immediate aftermarket; receives senior economic fees on the deal and furthest to the left on the cover

• Joint-Bookrunner: same responsibilities as sole-bookrunner, but split with another manager

• Co-Lead Manager: no bookrunning responsibilities; however, receives differentiated economics on the deal and a better position on the cover

• Co-Manager: most junior participating management position with no bookrun responsibilities; offers additional sponsorship to issuer; receives junior economics and far right position on cover

Piper functions

as a

Bookrunner, Co-

Lead Manager

and Co-

Manager

depending upon

the deal

Deal economics

depend upon

the status and

maturity of the

issuer

Piper’s Involvement in Equity Capital Markets Offerings

9


Deal Economics

•Fixed Economics: set gross spread to the banks on the offering, which is comprised of management fees, underwriting fees, and the selling concession

•Jump-Ball: subset of the selling concession based on who the designated account gives credit for the sale, bookrunner(s) frequently capped; underwriting and management fees fixed

•Bought Deal Spread: bank’s principal capital put at risk to buy shares from the issuer/selling shareholder at a discount to last trade and in turn sold to institutions at a discount from last trade and a premium to the price paid to the issuer/selling shareholder

Piper functions

as a

Bookrunner, Co-

Lead Manager

and Co-

Manager

depending upon

the deal

Deal economics

depend upon

the status and

maturity of the

issuer

Piper’s Involvement in Equity Capital Markets Offerings

10

PIPER JAFFRAY COVER POSITIONS

Piper as Sole-Bookrunner

Piper as Co-Lead Manager

Piper as Joint-Bookrunner

Piper as Co-Manager

11

PIPER JAFFRAY BOOKRUN OFFERINGS

$95,737,500 $247,817,032 $16,779,966

Follow-on Follow-on Registered Direct

August 2006 August 2006 August 2006

$62,560,000 $44,845,338 $20,925,000

IPO Follow-on Follow-on

June 2006 June 2006 June 2006

12

Overview of Equity Capital Markets

Marketing the Deal with Sales – Roadshow Layout

Distribution Strategy

Deal Pricing

Opening and Trading Process


Origination of Transaction with Investment Banking

Discussion of Economics and Number of Managers on Deal

Allocation Decisions

Size and Time of Transaction

Constant Communication with Management during the Roadshow

Primary roles

of the groups

within Equity

Capital

Markets –

Origination

and Execution

Ori

gin

ati

on

Execu

tion

13

CORPORATE CLIENT COMMUNICATION

The Role of the Equity Capital Markets Team

Situation RoleClient Targeting, Pitches, Update of Equity Capital Markets Conditions/Trendsand Industry Conferences Deal Strategy, Structure & Timing

Company Positioning & Piper J affray MarketingValuation Discussion

Prior to Roadshow Introduction ProcessPresentation CoachingSales Force Education

During Roadshow Institutional Sales FeedbackResearch Analyst FeedbackOrder Book UpdatesMarket UpdatesInstitutional Account Profiles

Pricing Recap of Roadshow and Order BookOffering Distribution OverviewAftermarket Trading Intelligence

Aftermarket Trading UpdatesGreen Shoe ManagementTrading Monitoring/Account Intelligence

14


The role of

Equity Capital

Markets in the

pricing of an

offering is to

balance the

desires of the

corporate client

and institutional

client

The goal is to

find the so-

called “market-

clearing” price

that pleases

both parties

Equity Capital Markets Role in deal offering

Corporate Client & Investment Banker

Institutional Client & Sales Force

Wants to sell for the highest price

Maximize offering value for the corporate client

Maximize profit for the firm

Wants to buy for the lowest price

Generate increased value for the Institutional client

Increase likelihood of long-term stock appreciation

Equity Capital Markets Desk

15

Golf Galaxy Inc. (NASDAQ: GGXY)

• Initial Public Offering 7/29/2005 at $14.00

• Filing Range $11.00 - $13.00

• Shares Filed 3,333,000• Shares Offered 3,950,000• Shares Offered with Green Shoe 4,542,500

– Primary 3,000,000– Secondary 1,542,500

• Post-Deal Market Capitalization $148.9 million

• Sole Bookrunner Piper Jaffray • Co-Lead Manager William Blair• Co-Managers A.G. Edwards, Wedbush Morgan

• Use of Proceeds Fund new store openings, general corporate purposes, pay all accrued and unpaid dividends due to preferred shareholders

Transaction Highlights

• Roadshow 9 Days, 14 Cities (Domestic Only); approximately 175 accounts on the roadshow via 62 institutional 1-on-1 meetings and 6

group functions

• Order Book 16x oversubscribed; 210 accounts indicating on the deal; 85% of 1-on-1 meetings converted into orders; 90 orders of 10%

or greater

• 1 Day Aftermarket Performance Offer = $14.00; Open = $17.05; Close = $18.61; +33% from offer price

• Post-IPO/ Aftermarket Piper Jaffray served as the sole sell-side advisor to Golf Galaxy in their sale to Dick’s Sporting Goods (11/13/06) at a price of $18.82 (+32% from IPO)

Golf Galaxy priced

an upsized, $63.6

million initial public

offering at $14.00,

one point above its

$11 - $13 filed

range

The Company is

headquartered in

Eden Prairie,

Minnesota and is a

leading specialty

retailer of golf

equipment, apparel

and accessories

GOLF GALAXY CASE STUDY

$63,595,000

Piper Jaffray

Sole BookrunInitial Public Offering

July 29th, 2005

16

Introduction

File IPO

GOLF GALAXY CASE STUDY

IPO Execution Timeline

Week of July 27th

Week of July 20th

Week of July 13th

Week of May 16th

Deal kick-off. Piper Jaffray research analyst gives a “teach-in” to the sales force giving them a better understanding of the business and its growth outlook.Golf Galaxy travels to the Piper Jaffray office and presents its story to the sales force. This is the same presentation that will be used on the IPO roadshow with institutional investors.Golf Galaxy begins its roadshow. The company management travels with the Piper Jaffray investment banker and a member of the institutional sales force. The roadshow will take them to institutional investors throughout the United States. The roadshow begins in Chicago and continues through Kansas City, Denver, San Diego, Los Angeles, San Francisco, Minneapolis and Milwaukee.Company continues its roadshow through Boston, New York, Baltimore and Philadelphia. Roadshow ends on Thursday afternoon. All-in-all, Golf Galaxy presented in front of 175 institutional investors via 62 1-on-1 appointments and 6 group functions

Pricing on July 29th

IPO is priced at $14.00 per share – above the $11-$13 filing range. Piper Jaffray receives orders for 16x the number of shares that are being offered in the deal. 85% of 1-on-1 meeting attendees submit and order to Piper Jaffray. Piper Jaffray’s Equity Capital Markets team works to allocate all of the shares to the institutional investors.

EQUITY CAPITAL MARKETS OVERVIEW

Piper Jaffray has consistently been a Top Equity Underwriter…

IPOs, Follow-ons & Convertibles in 2006 YTD

IPOs in 2006 YTD

Rank Manager No. Rank Manager No.1 J .P. Morgan Securities Inc. 160 1 J .P. Morgan Securities Inc. 461 Citigroup Global Markets Inc. 160 2 Credit Suisse 403 Banc of America Securities 150 3 Banc of America Securities 354 Merrill Lynch & Co. 149 4 Merrill Lynch & Co. 345 UBS Securities Inc. 137 5 Goldman Sachs & Co. 326 Wachovia Capital Markets LLC 124 5 UBS Securities Inc. 326 Goldman Sachs & Co. 124 5 Citigroup Global Markets Inc. 328 Credit Suisse 121 8 Deutsche Bank Securities Inc. 319 Lehman Brothers 119 9 Cowen & Co., LLC 2910 Morgan Stanley 118 10 Piper Jaffray & Co 2811 Deutsche Bank Securities Inc. 110 10 Morgan Stanley 2812 Bear Stearns & Co Inc. 80 12 Bear Stearns & Co Inc. 2713 Piper Jaffray & Co 78 13 Lehman Brothers 2614 Cowen & Co., LLC 71 14 Wachovia Capital Markets LLC 2415 J efferies & Co Inc. 66 14 Thomas Weisel Partners L.L.C. 2416 Raymond J ames 62 16 CIBC World Markets 1917 Thomas Weisel Partners L.L.C. 59 17 J efferies & Co Inc. 1718 RBC Capital Markets 54 18 Raymond J ames 1319 CIBC World Markets 47 19 RBC Capital Markets 1219 A.G. Edwards & Sons Inc. 47 19 William Blair & Co 1221 KeyBanc Capital Markets 37 19 Keefe Bruyette & Woods Inc. 1222 Keefe Bruyette & Woods Inc. 36 22 A.G. Edwards & Sons Inc. 1123 Stifel Nicolaus & Co 35 22 J MP Securities LLC 1123 J MP Securities LLC 35 24 Pacific Growth Equities 825 Robert W. Baird & Co. Inc 32 25 Lazard Capital Markets 7

18

Consumer Financial

Health Care Technology

Rank Manager No.1 Wachovia Capital Markets LLC 172 Piper Jaffray & Co 162 J .P. Morgan Securities Inc. 164 Goldman Sachs & Co. 155 Citigroup Global Markets Inc. 135 Banc of America Securities 137 Merrill Lynch & Co. 128 Cowen & Co., LLC 108 Lehman Brothers 108 Credit Suisse 1011 Thomas Weisel Partners L.L.C. 912 Deutsche Bank Securities Inc. 8

Rank Manager No.1 Keefe Bruyette & Woods Inc. 362 Citigroup Global Markets Inc. 313 Wachovia Capital Markets LLC 254 Banc of America Securities 225 J .P. Morgan Securities Inc. 215 Merrill Lynch & Co. 217 Credit Suisse 207 UBS Securities Inc. 207 Sandler, O'Neill & Partners, L.P. 2010 Bear Stearns & Co Inc. 1510 Deutsche Bank Securities Inc. 1515 Piper Jaffray & Co 12

Rank Manager No.1 Cowen & Co., LLC 272 Piper Jaffray & Co 253 UBS Securities Inc. 213 J .P. Morgan Securities Inc. 215 CIBC World Markets 206 Banc of America Securities 196 Morgan Stanley 198 Merrill Lynch & Co. 179 Thomas Weisel Partners L.L.C. 169 Lehman Brothers 1611 Goldman Sachs & Co. 1511 Rodman & Renshaw, Inc. 15

Rank Manager No.1 Credit Suisse 282 Goldman Sachs & Co. 263 Morgan Stanley 234 Lehman Brothers 225 Piper Jaffray & Co 215 J .P. Morgan Securities Inc. 215 Deutsche Bank Securities Inc. 218 Thomas Weisel Partners L.L.C. 209 Citigroup Global Markets Inc. 1910 Cowen & Co., LLC 1711 UBS Securities Inc. 1612 Banc of America Securities 15


Piper Jaffray

continues to

be one of the

most active

managers

across key

growth sectors

Sector Rank – IPOs & Follow-On Offerings Completed in 2006

19

$33.4

$46.9

$42.6$37.8

$69.2 $71.2

$39.0

$24.8

$14.5

$44.1$35.0

$0

$20

$40

$60

$80

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 YTD

Cap

ital

Rai

sed

($B)

210170

531

409

252

450

373

80 70 76146

0

100

200

300

400

500

600

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006YTD

Num

ber

of IP

Os

Com

plet

ed

Number of IPOs by Year

IPO Capital Raised by Year

Historical IPO Volume


20

$74.6$81.2 $75.4

$111.9

$68.8

$92.2

$69.3

$85.0$90.3

$124.8

$84.2

$0

$25

$50

$75

$100

$125

$150

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006YTD

Cap

ital

Rai

sed

($B)

617

398 374 346424

457

628

520

415431

464

0

100

200

300

400

500

600

700

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006YTD

Num

ber of

FO

s Com

plet

ed

Historical Follow-on Volume

Follow-on Capital Raised by Year

Number of Follow-ons by Year


21

Equity Capital

Markets is a

dedicated

resource for

equity offering

information

and analysis


– Equity Capital Markets is a dedicated resource for equity offering information and analysis, related trading intelligence, and broader market information/color

– Equity Capital Markets provides a weekly update of the following:Week in Review Deal Commentary

Industry CalendarYTD Performance Tables

YTD Deal PerformanceWeek Pricings Current

Backlog Week Filings

League TablesWithdrawn/Postponed Piper

Transactions

– Equity Capital Markets works with Investment Banking to tailor the best advice/approach for IPOs, follow-on offerings, and other equity-linked transactions

– Equity Capital Markets works with our corporate clients, Investment Banking, company/underwriter’s counsel, and Institutional Sales and Sales Trading to manage all aspects of the deal execution process

What is Equity Capital Markets to You?

22


Questions?Comments?

tuesday, december 12 th, 2006 discussion on equity capital markets chris christina principal (612)...

Documents

public markets

capital piper

public company

direct offerings

types of transactions

private company

average number of ipos

average number of followons