How%20Goldman%20Sachs%20assists%20Bank%20of%20Communication%20(BoCOM)%20during%20the%20IPO%20process

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How Goldman Sachs assistsBank of Communication
(BoCOM)during the IPO process
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Member List

• Tse Po Man, Polly 033130
• Wong Wing Yan,Wing 033138
• Yip Wing Man,Tobi 033140
• Lai Pak Hei, Tommy 033146
• Siu Kin Fai, Eric 033172

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Agenda

• Introduction of Investment Banks Industry
• Background of Goldman Sachs
• Case Study BoCOM
• -- The Duty of Goldman Sachs
• Prospect

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Introduction of Investment Banks Industry
Polly
5
What is Investment Bank ?

• assist corporations in raising funds in the
  capital markets
• strategic advisory services for mergers,
  acquisitions and other types of financial
  transactions
• best-known financial services such as Goldman
  Sachs, Morgan Stanley.

Polly
6
Role of modern investment banks - Today's Society

• Underwriting and distributing new security issues
  
• Offering brokerage services
• Providing financial advice
• Providing financial security research
• Market-Making, in particular securities

Polly
7
Size of industry

• revenue increased 52.8 billion for 3rd year of
  2005
• This was up 14 on the 2004 but 7 below the 2000
  peak.

Polly
8
Polly
9
Competition and challenges for Investment Banks

• Direct purchase by institutional investors from
  issuers
• more corporations establish in-house groups ? to
  perform activities traditionally done by
  investment banking firms

Polly
10
Current trends of the business

• the boundaries between commercial banks
  investment banks has blurred
• the need for capital in secondary trading has
  increase.
• Investment banks spend a lot of money on
  designing and developing new technological and
  trading platforms.

Polly
11
Goldman Sachs
Tobi
12
Goldman Sachs

• Founded in 1869, it is one of the oldest and
  largest investment banking firms
• Operate in 23 areas
• New York, London, Tokyo, Hong Kong and other
  major financial centers around the world.

Sale in different Areas (in )
Tobi
13
Goldman Sachs

• Its activities are divided into three segments
• Investment Banking,
• Trading and Principal Investments
• Asset Management and Securities Services

Financial Performance in 2005 (in million)
Tobi
14
Investment Banking

• Divided into two components
• Financial Advisory
• advisory assignments with respect to mergers and
  acquisitions, divestitures, corporate defense
  activities, restructurings and spin-offs
• Underwriting
• public offerings and private placements of
  equity, equity-related and debt instruments.

Tobi
15
Competitors

1. CSFB
2. Merrill Lynch
3. Morgan Stanley
4. JPMorgan Chase
5. Bear Stearns
6. Charles Schwab
7. CIBC World Markets
8. Citigroup Global Markets
9. Credit Suisse (USA)
10. FMR
11. Lehman Brothers
12. UBS Financial Services

Tobi
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Competitors

• According to the sale revenue(2005),
• top three investment banks are
• Merrill Lynch,
• Morgan Stanley
• Goldman Sachs.

Tobi
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Sale
Tobi
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Latest operation

• 14/04/2006
• Upgrade Maonshan Iron Steel
• made the shares surged more than 13 percent
  (gained 13.64)
• 04/04/2006
• Upgrade Bank of East Asia
• surging 9.23 percent Thursday.

Tobi
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Latest operation

• 06/04/2006
• Cooperate with Morgan Stanley
• Shimao Property Holdings
• Morgan Stanley has been invited to co-arrange the
  sale with Goldman Sachs.

Tobi
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Latest operation

• 03/04/2006
• IPO of Bank of China
• hiring Goldman Sachs, UBS and BOC International
  (Holdings) to handle the planned June sale.

Tobi
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Duty of Goldman Sachs

• Origination
• Underwriting
• Distribution
• IPO

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Job Duty --- Origination

• Provide advice
• Analyze the feasibility
• Amount of money to raise
• Type of financing needed

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Job Duty --- Origination

• Provide advice (cond)
• Characteristics of securities to be issued
• Best sale date
• Prepare the official sale documents

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Job Duty --- Underwritting

• Investment banker guarantees to buy the new
  securities for a fixed price
• Risk
• Securities may be sold for less than the
  underwriting syndicate purchased them

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The brief time table of IPO of the BoCOM
24/09/04 27/02/05
08/07/2003
15/03/2004
23/06/2004
23/09/04
28/02/05
30/05/2005
01/06/05 10/06/05
27/04/05
12/05/2005
23/05/05
12/06/05
13/06/05 16/06/05
18/06/05
23/06/05
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23/06/2004 HSBC would use RMB 8.2billion
to buy 20 share of BoCOM

• HSBC would become the only one investor from
  abroad.
• HSBC would use RMB 8.2 billion to buy 20 share
  of BoCOM

ERIC
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24/08/2004 Shares opened to BoCOM staff
for buying

• BoCOM
• Allowing its employees
• buy the shares of the company.
• motivation

ERIC
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24/09/04 - 27/02/05 Documentary submissions

• With the help of Sponsors and Consultants (like
  Goldman Sachs)
• Submit documents like
• Draft of the profit forecast memorandum
• Draft formal notice of listing
• Draft securities application form
• Draft document of title or certificate of the
  securities

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28/02/05 Submitting formal application to HKEx
for listing

• Formal application was submitted
• to the Hong Kong Exchanges and Clearing Ltd.

ERIC
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27/04/05 Enter the Hearing procedure by Listing
Committee

• PricewaterhouseCoopers
• Provide assistance during the hearing procedure
  of the Bank of Communications

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23/05/05 Approved from the Listing Committee of
the HKEx

• The hearing for the listing application of the
  BoCOM
• Formally approved!

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01/06/05 10/06/05 Global Road shows

• Holds more about 90 road shows
• Meets more than 500 global investors in Hong
  Kong, Singapore, USA, Europe and Japan
• Promote their companys securities

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12/06/05 Decide only issue H share in Hong
Kong only

• With the advise from the investment banks like
  Goldman Sachs
• Issue H share only in Hong Kong
• Give up issuing A share in Shanghai Stock Market

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12/06/05 Decide only issue H share in Hong
Kong only

• A share stock market in Shanghai weak
• Cannot afford the vast amount of shares of BoCOM
• Worst scenario
• Undersubscription !!!

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13/06/05 16/06/05 Public Offering

• Started IPO on 13th of May
• Initiated 5.8 billion of shares
• 0.29 billion of H shares
• The price was set within 1.95 and 2.55 HKDollar
• The maximum fund ? 12.64 billion
• Deadline ?16th of June.
• The price was confirmed on 18th of June
• Strengthen the bank capital and support the
  development of the bank.

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18/06/05 Price determination

• One of the most important parts of IPO.
• If the price is lower average ?the shareholders
  will lose
• If it is too high? buyers may lose the interest
  on buying the securities
• ?Goldman Sachs will need to hold all the
  rest of the BoCOM shares.
• The price range ?buyers acceptableness
• Price ? first set by Goldman Sachs
• ?finally by the top management level of
  BoCOM.

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• Base on the following situation to determine the
  price.
• The price determination is based on the following
  principles
• the P/E ratio and P/B ratio
• the benefit of old shareholders
• the benefit of new shareholders
• the benefit of China and the industry of China
  banking
• the stability of the market after listed on board

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23/06/05 Listing on Main Board

• Code number 3328 BoCOM
• The stock exchange market of Hong Kong
• The price HK 2.8.
• Higher than the listed price 13
• 205 times in individual investors oversubscribed
• 27 times in firm investors oversubscribed
• IPO?Fourth highest in the history of Hong Kong

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12/05/2005 BoCOM gave up A share to be
listed on board

• BoCOM gave up A share to be listed on board

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30/05/2005 Confirm the date of Road Show

• BoCOM confirm the date of Road Show.
• In the U.S., Europe, Japan, Singapore, and Hong
  Kong.

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Prospect of Investment Bank

• China Market
• China Company list on HK main board
• Cooperate with competitors
• Shimao Property Holdings.
• Morgan Stanley has been invited to co-arrange the
  sale with Goldman Sachs
• Online Trading Platform

Wing
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Current Price of BOCOM
Wing
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Current Price of BOCOM
Wing
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BOCOM Financial Report 2005

• Billion (RMB)
• Total Asset 1,423 24.43
• Net interest income 31.59 25.4
• Net handling charge 2.10 25.39
• and commission income
• Other income 1.45 33.3
• Earning before interest 12.84 65.7
• Tax 3.60 -41.4
• Net Profit 9.24 476.6

Wing
45
Prospect of BOCOM

• Target Price
• Goldman Sachs
• 4.38 ? 5.22
• Merrill Lynch
• Suggest sell it
• 4

Wing
46
Conclusion

• Investment Bank
• Goldman Sachs
• Case Study
• BOCOM
• Prospect
• Investment Bank
• BOCOM
• How Risky is IPO Investing

Wing
47
The End