When public companies offer more stock, underwritten by investment banks…should you buy that stock?

So as some of you may know, I’ve been managing some money for some clients using Insider Transactions (Form 4 filings) as a key trading signal. One of the companies that my algorithm picked, XG Technologies, has been doing poorly – so poorly, in fact, that we sold it off.

As they went down, they did an offering of securities that was underwritten by Roth Capital Partners. Someone on the stock-twitter universe complained, “Roth are a bunch of crooks”, and I wondered how true that sentiment is.  Are Roth Capital Partners crooks (in the ethical, not necessarily legal, sense of the word)?  Well, how do their offerings usually perform?

When a company makes an issue available for the public to purchase, it generally has to file a Form 424B4 in accordance with Rule 424(b)(4) of the Securities Exchange Act of 1933.  So, I downloaded the corpus of Form 424B4 filings (from 2005 through 2015) from the SEC’s wonderful EDGAR database, and then wrote a parser to pick out the name of each security and the corresponding investment banks that underwrote each offering.

I excluded deals with companies traded on the pink sheets, and I also excluded banks that underwrote less than 5 such deals.

So to answer my question – are the banks underwriting and placing the deals actually offering a good deal to their customers? Initial conclusion is the answer is a resounding “NO”…. But Roth Capital Partners deals actually perform pretty well compared to the rest.

TABLE:
Performance of Secondary Offerings of Publicly Traded Securities – Breakdown by Investment Bank

Name of Underwriting Investment Bank Six Month Return (Split-Adjusted) Twelve Month Return (Split-Adjusted)
Northland Securities, Inc. 0.79% 387.20%
Sandler O’Neill & Partners, L.P. 14.82% 32.40%
Goldman Sachs (Asia) L.L.C. 16.05% 29.12%
Brean Murray, Carret & Co., LLC 15.17% 26.18%
Roth Capital Partners, LLC 1.55% 25.29%
TPG Capital BD, LLC 8.43% 24.86%
SG Cowen & Co., LLC -4.18% 23.40%
LOYAL3 Securities, Inc. 21.23% 21.23%
Harris Nesbitt Corp. 9.80% 21.02%
Wedbush Securities Inc. 3.53% 20.23%
C.E. Unterberg, Towbin, LLC 18.17% 20.08%
Credit Suisse First Boston LLC 15.32% 19.89%
Natixis Securities Americas LLC 6.10% 19.86%
ThinkEquity LLC 7.92% 18.78%
China Renaissance Securities (Hong Kong) Limited 12.47% 18.09%
SMBC Nikko Capital Markets Limited 10.49% 17.91%
Calyon Securities (USA) Inc. 11.03% 17.81%
CMG Institutional Trading LLC 13.42% 16.73%
Sanford C. Bernstein & Co., LLC 17.30% 16.51%
Sidoti & Company, LLC 16.73% 15.52%
Rabo Securities USA, Inc. 13.98% 15.51%
Blaylock & Company, Inc. -0.01% 15.48%
Capital One Southcoast, Inc. 6.27% 15.48%
Moelis & Company LLC 9.40% 14.37%
Santander Investment Securities Inc. 5.57% 13.60%
J.J.B. Hilliard, W.L. Lyons, LLC 9.65% 13.51%
U.S. Bancorp Investments, Inc. 5.58% 11.55%
RBS Securities Inc. 5.65% 11.14%
Comerica Securities, Inc. 8.29% 10.95%
The Williams Capital Group, L.P. 3.30% 10.55%
Credit Agricole Securities (USA) Inc. 6.08% 10.15%
PNC Capital Markets LLC 2.27% 10.05%
Leerink Swann & Co., Inc. 7.12% 9.48%
Telsey Advisory Group LLC 10.93% 9.48%
Samuel A. Ramirez & Co., Inc. 8.02% 8.82%
BMO Capital Markets Corp. 5.67% 8.44%
Adams Harkness, Inc. 3.99% 8.10%
Blaylock Robert Van, LLC 8.52% 7.99%
Loop Capital Markets LLC 8.40% 7.91%
A.G. Edwards & Sons, Inc. 6.07% 7.56%
Craig-Hallum Capital Group LLC 11.94% 7.30%
Mitsubishi UFJ Securities (USA), Inc. 3.45% 6.73%
ING Financial Markets LLC 5.87% 6.34%
Fortis Securities LLC 3.72% 6.28%
NatCity Investments, Inc. 0.68% 6.13%
Lebenthal & Co., LLC 6.63% 5.79%
Dahlman Rose & Company, LLC 9.98% 5.43%
The Benchmark Company, LLC 6.35% 5.35%
Greenwich Capital Markets, Inc. 1.64% 4.72%
Mizuho Securities USA Inc. 4.37% 4.43%
Dougherty & Company LLC -6.82% 4.17%
Montgomery & Co., LLC -3.18% 3.37%
Muriel Siebert & Co., Inc. -5.11% 3.36%
Ferris, Baker Watts Incorporated 11.42% 3.09%
Legend Merchant Group, Inc. 0.89% 2.87%
HSBC Securities (USA) Inc. 1.87% 2.63%
CastleOak Securities, L.P. -5.71% 2.62%
Dowling & Partners Securities, LLC 2.93% 1.28%
Morgan Keegan & Company, Inc. -1.85% 1.15%
Natixis Securities North America Inc. 3.26% 0.79%
Drexel Hamilton, LLC -3.77% 0.68%
Wells Fargo Securities, LLC 1.83% 0.62%
J.P. Morgan Securities Inc. 1.70% 0.51%
Leerink Partners LLC -1.16% 0.35%
JMP Securities LLC 3.51% 0.30%
Southwest Securities, Inc. 2.72% 0.02%
Mellon Financial Markets LLC 0.00% 0.00%
BNY Capital Markets, Inc. 1.42% -0.09%
Thomas Weisel Partners LLC 2.69% -0.13%
Pickering Energy Partners, Inc. 10.50% -0.13%
Guggenheim Securities, LLC 1.07% -0.25%
Wachovia Capital Markets, LLC 2.58% -0.26%
Sanders Morris Harris Inc. 16.01% -0.81%
GunnAllen Financial, Inc. 5.89% -0.90%
Howe Barnes Hoefer & Arnett, Inc. 4.40% -1.66%
Deutsche Bank Securities Inc -2.83% -1.68%
Avondale Partners, LLC -1.77% -1.85%
Piper Jaffray & Co -0.18% -1.89%
BNP Paribas Securities Corp 0.89% -1.91%
Raymond James & Associates, Inc. 4.75% -1.96%
KeyBanc Capital Markets -2.32% -2.08%
SunTrust Capital Markets, Inc. -4.44% -2.20%
Lazard Capital Markets LLC -5.42% -2.20%
ABN AMRO Incorporated 4.67% -2.26%
Banco Bilbao Vizcaya Argentaria, S.A. 5.42% -2.27%
Zelman Partners LLC -2.88% -2.44%
Canaccord Genuity Inc. -1.19% -2.48%
Nomura Securities International, Inc. 17.60% -2.52%
Pritchard Capital Partners, LLC 8.71% -2.68%
Keefe, Bruyette & Woods, Inc. 1.13% -2.80%
Bear, Stearns & Co. Inc. -4.80% -2.82%
Wedbush Morgan Securities Inc. 0.01% -3.06%
Needham & Company, LLC -0.42% -3.11%
Boenning & Scattergood, Inc. -0.37% -3.12%
Robert W. Baird & Co. -2.42% -3.22%
Lehman Brothers Inc. -1.48% -3.44%
Sterne, Agee & Leach, Inc. 0.07% -3.47%
Cochran Caronia Waller Securities LLC 4.60% -3.59%
RBC Capital Markets -0.60% -3.61%
UBS Securities LLC -0.86% -3.83%
Banc of America Securities LLC -3.52% -3.89%
Stanford Group Company -7.20% -4.06%
Tudor, Pickering, Holt & Co. Securities, Inc. -0.40% -4.12%
Barclays Capital Inc -1.48% -4.23%
William Blair & Company L.L.C. 0.44% -4.40%
Credit Suisse Securities (USA) LLC 0.28% -4.51%
Scotia Capital (USA) Inc. 1.52% -4.55%
KKR Capital Markets LLC -3.05% -4.70%
UBS AG 11.99% -4.82%
Citigroup Global Markets -1.54% -4.98%
Merrill Lynch, Pierce, Fenner & Smith -1.98% -5.26%
Oppenheimer & Co. Inc. -1.83% -5.30%
CIBC World Markets Corp. 1.81% -5.70%
Morgan Stanley & Co. -1.88% -5.80%
FBR Capital Markets & Co. -4.62% -6.00%
SunTrust Robinson Humphrey, Inc. -4.18% -6.11%
Stifel, Nicolaus & Company, Incorporated 0.61% -6.23%
Wunderlich Securities, Inc. -3.76% -6.41%
Pacific Growth Equities, LLC -3.82% -6.46%
Morgan Joseph & Co. Inc. -3.60% -6.54%
First Analysis Securities Corporation 21.21% -6.57%
Johnson Rice & Company L.L.C. -3.92% -6.73%
Lloyds Securities Inc. -4.00% -6.75%
Janney Montgomery Scott LLC -9.35% -6.89%
Stephens Inc. -1.70% -6.90%
Ryan Beck & Co., Inc. -6.17% -8.11%
Fifth Third Securities, Inc. -1.55% -8.19%
Natexis Bleichroeder Inc. -15.75% -8.60%
Howard Weil Incorporated -5.49% -8.69%
Jefferies & Company, Inc. -2.75% -8.85%
TD Securities (USA) LLC 6.85% -8.86%
Apollo Global Securities, LLC 4.66% -8.90%
Goldman, Sachs & Co -4.67% -9.03%
Compass Point Research & Trading, LLC -9.05% -10.31%
Friedman, Billings, Ramsey & Co., Inc. -7.69% -10.54%
SMBC Nikko Securities America, Inc. 5.11% -10.75%
Cowen and Company, LLC -1.16% -10.84%
BB&T Capital Markets, a division of BB&T Securities, LLC -6.27% -10.96%
Fox-Pitt, Kelton Incorporated 9.91% -11.67%
DNB Markets, Inc. -4.99% -12.03%
ThinkEquity Partners LLC -8.79% -12.13%
Ladenburg Thalmann & Co. Inc. -8.09% -13.05%
SG Americas Securities, LLC -5.59% -13.42%
WR Hambrecht + Co, LLC -8.78% -13.49%
USCA Securities LLC -16.11% -13.59%
E*TRADE Securities LLC 2.93% -13.60%
Simmons & Company International -6.83% -13.75%
Merriman Curhan Ford & Co. -18.09% -13.75%
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. 17.56% -13.83%
Allen & Company LLC -12.50% -14.52%
Evercore Group L.L.C. -2.41% -14.53%
Pacific Crest Securities Inc. -8.47% -14.80%
Dominick & Dominick LLC -17.89% -14.82%
First Albany Capital Inc. -15.81% -14.90%
Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC -0.43% -15.01%
Houlihan Lokey Capital, Inc. 9.59% -15.33%
Jefferies LLC -4.51% -15.48%
Signal Hill Capital Group LLC -12.87% -15.70%
Rodman & Renshaw, LLC -7.08% -16.10%
Macquarie Capital (USA) Inc. 0.56% -16.69%
Barrington Research Associates, Inc. -6.60% -17.22%
Aegis Capital Corp -10.13% -17.75%
Capital One Securities, Inc. -7.07% -17.98%
D.A. Davidson & Co. -16.04% -20.45%
Feltl and Company 8.23% -20.54%
Canaccord Adams Inc. -4.20% -20.75%
Blackstone Advisory Partners L.P. -7.52% -22.02%
Maxim Group LLC -17.07% -23.00%
Susquehanna Financial Group, LLLP -1.49% -23.01%
DnB NOR Markets, Inc. -24.52% -24.08%
BTIG, LLC -13.94% -24.73%
Cantor Fitzgerald & Co. -21.91% -26.00%
Legg Mason Wood Walker, Incorporated -20.73% -27.76%
Imperial Capital, LLC -20.02% -28.34%
Utendahl Capital Partners, L.P. -31.41% -30.77%
Global Hunter Securities, LLC -17.40% -32.21%
MLV & Co. LLC -26.84% -37.67%
BBVA Securities Inc. -10.21% -40.40%
DVB Capital Markets LLC -10.33% -40.90%
EarlyBirdCapital, Inc. -45.12% -41.93%
CLSA Limited -29.60% -42.11%
China International Capital Corporation Hong Kong Securities Limited -35.79% -42.84%
Brean Capital, LLC -16.68% -47.96%
RS Platou Markets AS -14.00% -50.82%
CRT Capital Group LLC -30.87% -52.76%
Jesup & Lamont Securities Corporation -64.92% -57.15%
SDS Capital Group SPC, Ltd. (5) -19.34% -58.02%
Laidlaw & Company (UK) Ltd. -16.62% -60.73%
Dawson James Securities, Inc. -33.95% -60.78%
I-Bankers Securities, Inc. -60.33% -62.92%
Newbridge Securities Corporation -30.28% -70.05%
Chardan Capital Markets, LLC -45.93% -73.59%
Joseph Gunnar & Co., LLC -37.15% -79.75%
H.C. Wainwright & Co., LLC -16.84% -81.90%

 

* I was asked, “Are you double counting where there were multiple underwriters?”

The answer is Yes– for example, if Credit Suisse and Goldman Sachs both underwrote a deal, I counted the performance in both their columns.

So I made another table that bucketed by the first listed underwriter.

TABLE: Performance of Secondary Offerings of Publicly Traded Securities – Breakdown by Investment Bank – First Listed Underwriter Only

Name of Underwriting Investment Bank Six Month Return (Split-Adjusted) Twelve Month Return (Split-Adjusted)
EarlyBirdCapital, Inc. -61% -61%
Maxim Group LLC -57% -65%
Chardan Capital Markets, LLC -51% -72%
Aegis Capital Corp -46% -49%
Dawson James Securities, Inc. -45% -67%
China International Capital Corporation Hong Kong Securities Limited -42% -45%
CRT Capital Group LLC -39% -60%
First Albany Capital Inc. -36% -33%
Cantor Fitzgerald & Co. -36% -47%
Morgan Stanley & Co. LLC -26% -72%
Janney Montgomery Scott LLC -25% -22%
Leerink Partners LLC -25% -46%
Ladenburg Thalmann & Co. Inc. -24% -28%
D.A. Davidson & Co. -22% -20%
BTIG, LLC -14% -25%
Allen & Company LLC -13% -15%
Canaccord Adams Inc. -12% -25%
FBR Capital Markets & Co. -12% -11%
Evercore Group L.L.C. -12% -41%
H.C. Wainwright & Co., LLC -12% -83%
BB&T Capital Markets, a division of Scott & Stringfellow, Inc. -8% -3%
Goldman, Sachs & Co. -7% -13%
Credit Suisse Securities (USA) LLC -7% -14%
BB&T Capital Markets, a division of Scott & Stringfellow, LLC -7% -9%
Roth Capital Partners, LLC -6% -44%
Aegis Capital Corp. -6% -12%
BB&T Capital Markets, a division of BB&T Securities, LLC -6% -16%
Banc of America Securities LLC -5% -6%
Friedman, Billings, Ramsey & Co., Inc. -5% -13%
ABN AMRO Securities (USA) LLC -5% -33%
Jefferies & Company, Inc. -4% -20%
Barrington Research Associates, Inc. -4% -14%
Cowen and Company, LLC -4% -17%
Goldman Sachs (Asia) L.L.C. -4% -23%
Blackstone Advisory Partners L.P. -4% -4%
Citigroup Global Markets Inc. -3% -9%
BNP Paribas Securities Corp. -3% -1%
Boenning & Scattergood, Inc. -3% -10%
Barclays Capital Inc. -3% -6%
Bear, Stearns & Co. Inc. -1% -1%
J.P. Morgan Securities Inc. 0% -1%
CIBC World Markets Corp. 1% -6%
Deutsche Bank Securities Inc. 2% 5%
Avondale Partners, LLC 3% 4%
Apollo Global Securities, LLC 3% -3%
Piper Jaffray & Co. 4% -11%
Brean Murray, Carret & Co., LLC 4% -4%
Canaccord Genuity Inc. 5% 4%
Jefferies LLC 5% -2%
A.G. Edwards & Sons, Inc. 6% 8%
Keefe, Bruyette & Woods, Inc. 7% 11%
JMP Securities LLC 7% 12%
BMO Capital Markets Corp. 7% 13%
Citigroup Global Markets, Inc. 9% 8%
Calyon Securities (USA) Inc. 11% 12%
J.P. Morgan Securities LLC 11% 13%
ABN AMRO Rothschild LLC 13% 12%
China Renaissance Securities (Hong Kong) Limited 14% 21%
Credit Suisse First Boston LLC 15% 19%
Lazard Capital Markets LLC 17% 12%
Craig-Hallum Capital Group LLC 17% 4%
Citigroup Global Markets Inc 21% 37%

Note: For this table, I didn’t collapse underwriters with similar names (with slight spelling variations) so there is some overlap.

Author: zack

Zack Burt started programming at age 9 after a passion for memorizing Pi led him to wanting to compute it programmatically. His passion for the stock market began at age 10 while participating in a school competition to create a mock portfolio. His love for markets, math and programming led him to University of Chicago, where his studies emphasized psychology and pure (abstract) mathematics. He passed the Series 65 examination in November 2015.

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