Is this the sign of a market top in IPOs?
The man whose company was at the center of the 2008 financial crisis and accused of packaging opaque mortgage derivatives is now looking to take small to mid-sized Chinese companies and turn them into initial public offerings in the U.S.
Lehman Brothers’s CEO caught in the mortgage derivatives mess
Richard “Dick” Fuld, nicknamed the “Gorilla of Wall Street” for his legendary temper, was chairman and CEO of Lehman Brothers when the company got caught up in the mortgage derivatives mess in 2008. His firm famously did not receive a government bailout and was allowed to fail. Stock market traders, sensing that the entire financial system could collapse due to the weight of excessive derivatives exposure, lost faith in the stock market, causing a market crash that has been described as being more destructive than the great depression.
Fuld’s next adventure is to take somewhat controversial Chinese small and mid-sized businesses and package them to sell to U.S. investors.
Lehman’s Fuld Enters Chinese IPO Market
Fuld wants to create a “green channel” for Chinese small and medium enterprises to list their stocks in the United States. To build this pipeline he purchased the failing National Stock Exchange, was originally founded in 1885 in Cincinnati and moved to New Jersey in 2007. The exchange collapsed in May this year having only accounted for 0.2% of total stock trading volume in the U.S. Now it can be utilized to facilitate US IPOs for Chinese small and medium sized enterprises by taking advantage of favorable regulatory rules, according to a report in China Times. Fuld also plans to partner with China’s Suzhou Kaida Venture Capital to find appropriate candidates for IPOs.
In March 2009 Fuld set up Matrix Advisors, a small strategic consultancy by that assists small and medium sized enterprises. For his part, he believed the primary problem at Lehman wasn’t the derivatives that were rapidly being increasingly recognized as not what they were advertised as, and potentially worthless in value. The issue, he says, was that the company lacked liquidity, but that the U.S. Federal Reserve didn’t provide a loan when it was needed. He says most of the debts were ordinary debts, not bad debts.