Another one bites the dust

It's been a nice year for IPOs, thanks to a late-year surge, and next year is shaping up to be even better. That, in part, is thanks to one of the last big investment partnerships going public after 156 years as a private company. Lazard, the Last Haven of the Last Aristocrats, will finally open its doors to the hoi-polloi, thanks in part to their arriviste head Bruce Wasserstein. I've liked the company ever since I read Financier, the biography of Andre Meyer. Meyer led the firm through the postwar years, and seems to have gotten a huge block of stock in every single success story of the next thirty years (he always sold most of his shares early, but still made money advising the companies).

What's odd about this IPO is that the company doesn't need and shouldn't want access to the public equity markets. You can understand almost every investment bank IPO from the perspective of increasing capital requirements -- Goldman Sachs couldn't be a huge participant in the market if they always had to set aside a chunk of their capital in case one of the partners wanted to buy another Matisse. But Lazard's big business is M&A advisory, and their big selling point is that they don't have a big trading department, so they won't have huge conflicts of interest. And it's the trading department that consume so much capital these days. It's one thing for Goldman to explain that they've gone from 50,000-share blocks every month to 500,000-share blocks every week, ergo they need capital or they'll be swamped; it's another issue entirely for Lazard to meekly explain that they've replaced their Rolodexes with Palm Pilots and could they please have nearly a billion dollars to smooth the transition?

In a conceptually pure IPO, investors who want shares of an interesting business at a reasonable price pay money to businesses that need that money for expansion. A cash-generating company with essentially no capital needs has no business selling stock unless they plan on paying out most of their earnings as dividends or using the money to buy competitors. I think the deal is just Bruce Wasserstein's attempt to massage his own ego by making one last big deal; it's a shame his grandstanding comes at the expense of his partners, his clients, and his new investors.