2012年5月19日 星期六
Epic Tech IPOs: Triumphs, a Travesty, and a Tragedy
A youngster with a disdain for wealth, distrustful of Wall Street bankers, suddenly scores millions of dollars for himself and his hacker friends. Ah, Bill Gates was quite the story back in 1986. As Facebook winds down its first day of trading, here’s a look back on the drama of some of tech’s other—sometimes eerily similar—classic IPOs.
Apple (AAPL), Dec. 12, 1980
Apple wasn’t the first computer company to go public, but it set the bar for Silicon Valley wunderkinder. Not to mention making lots of money for lots of people (including Forrest Gump). The nearly 4-year-old company went public at $22 per share; adjusted for subsequent stock splits, that’s $2.75. Today it trades around $540. The share price rose 30 percent on the first day. Steve Jobs, age 25, was instantly worth $256 million. The shares made millionaires of 300 people that first day—but not all were Apple employees. As recounted by Walter Isaacson in Steve Jobs, the CEO refused to give stock to his close college friend and longtime employee Daniel Kottke, despite the pleas of co-workers. Co-founder Steve Wozniak, on the other hand, sold a couple thousand of his own shares at low prices to mid-level Apple workers. “Most of his beneficiaries made enough to buy a home,” Isaacson notes. His stinginess aside, Jobs soon was plastered on magazine covers and inspired a generation of tech innovators.
Eagle Computer, June 8, 1983
Eagle was one of the hottest sellers of PC “clones”—the desktop computers built with the same architecture as IBM’s machines. And its IPO briefly made company President Dennis Barnhart a millionaire. Then tragedy struck and Eagle became a cautionary tale for fleeting IPO fortunes. Hours after the IPO, Barnhart, 40, was killed when his red Ferrari crashed through a guard rail and into a ravine a block from company headquarters. A yacht salesman who was riding with him survived. Trading in Eagle’s shares halted. But the car crash didn’t kill Eagle; that was accomplished later by a sustained IBM legal assault against the clone makers.
Microsoft (MSFT), March 13, 1986
Six years after Apple’s stock offering, the IPO extravaganza had become a rite of passage for young tech stars. Several themes in the Microsoft IPO seem familiar today: The outsize wealth of the founders—$350 million that first day for Bill Gates, then 30, a young CEO with no taste for baubles but an intense desire to retain control of his creation. And a big (32 percent) opening-day trading pop, from Microsoft’s $21 IPO pricing to its $27.75 close. Five years later, Microsoft had returned 1,336 percent. Indeed, the sterling IPO Class of 1986 (PDF)—which included Oracle (ORCL), Sun Microsystems, Adobe (ADBE), and Silicon Graphics (SGI)—would lead the way out of a mid-’80s tech slump.
theGlobe.com, Nov. 13, 1998
Long before Facebook was theGlobe.com, another startup that brought like-minded people together, caught fire with users, gained millions in private financing, and rocketed out of the IPO gate. Nothing quite captures the mania, audacity, and eventual ridiculousness of the dot-com bubble like the tale of this proto social network. Started by two Cornell students, Stephan Paternot and Todd Krizelman, theGlobe—like many of its bubble brethren—had little in the way of sales ($2.7 million over the nine months before the offering) and no profit. But with the IPO the founders were suddenly worth $70 million each. Footage of Paternot dancing on a nightclub table in shiny leather pants quickly came to symbolize dot-com excess. TheGlobe’s share price collapsed a year later, along with the rest of the Nasdaq, and the main part of the business shut down in 2001.
Google (GOOG), Aug. 19, 2004
Google was supposed to be the IPO to change all IPOs. It wasn’t; the Dutch auction of shares, seen by founders Larry Page and Sergey Brin as a way to wrest some control of share pricing from the bankers, confused many investors and never caught on as a tech industry standard. But those who bought the shares and held them weren’t disappointed. A year and a half after IPOing at $85, the stock had quintupled, creating an estimated 1,000 millionaires and five billionaires. The sheer weight of its wealth distorted the Valley’s economy; as Roben Farzad wrote in December 2005: “Instead of nurturing the most promising startups with an eye toward taking the fledgling businesses public, a growing number of VCs now scour the landscape for anyone with a technology or service that might fill a gap in Google’s portfolio. Google itself and not the larger market has become the exit strategy as VCs plan for the day they can take their money out of their startups.”
Facebookmania Begins
(Updates with volume and a revised closing price.)
Aug. 9, 1995. Aug. 19, 2004. Those dates are when Netscape and Google (GOOG), respectively, went public—each ushering in a new era of the Internet and Wall Street’s ardor for its latest and greatest startups . We will similarly look back at May 18, 2012, the date of Facebook’s (FB) IPO, as a landmark moment in the history of what they used to call the World Wide Web.
At 9:30 a.m. Eastern time, Zuckerberg rang the electronic index’s opening “bell” from a party at Facebook’s California campus. The shares won’t start trading until 11 a.m. For now, the social network, which yesterday sold 421.2 million shares at $38 apiece, is worth $104.2 billion. That represents a distinctly 1999-flavored 107 times trailing 12-month earnings, more than every member of the Standard & Poor’s 500-stock index save for Amazon (AMZN) and Equity Residential (EQR). And $104 billion is worth more than blue chips like McDonald’s (MCD), Disney (DIS), and Cisco Systems (CSCO), indeed, more than 90 percent of the components of the S&P 500.
“Can you get me Facebook?” is the question that dominated calls to and from brokers since the eight-year-old company first announced its IPO. “There’s hundreds of millions of people that want to emotionally buy this stock, and most of them are going to have to buy it in the aftermarket,” said Jon Merriman, chief executive officer of investment firm Merriman Holdings in San Francisco. The underwriting bankers, led by Morgan Stanley (MS), JPMorgan Chase (JPM), and Goldman Sachs Group (GS), stand to share about $176 million for managing the IPO, said two people with knowledge of the matter, who declined to be identified because the rate is private.
At $16 billion, Facebook’s debut knocks out General Motors’ (GM) 2010 relisting to become the second-largest IPO in U.S. history, excluding so-called over-allotments, which let underwriters buy more shares at a later date, data compiled by Bloomberg show. Visa (V) raised $17.9 billion in its 2008 IPO, the biggest in the U.S., and later expanded the sale to $19.7 billion.
Even if FB doubles or triples at the open, it will be a challenge, to say the least, for the stock to match Google’s meteoric ascent since it went public eight years ago. Google’s valuation has jumped almost ninefold; Facebook would have to be worth $920 billion by 2020 to achieve that feat. For context: Apple (AAPL), the most valuable company in the world, now has a market value of $496 billion.
Bankhaus Main (RGS3), making a market for Facebook shares in Frankfurt before the official start of trading, quoted the latest offers at the equivalent of $70 a share, Bloomberg News reported.
Aftermarket speculators, on your marks …
UPDATE:
It’s 12:30 p.m. of Facebook’s big first day as a public company and the stock is not even up 10 percent? These are indeed dark days for a once-proud America.
No, but seriously: People were whispering double the $38 IPO price on a Friday feeding frenzy by Mom & Pop and institutional investors. A disaster for Facebook? Hardly. Give props to Zuckerberg, Sandberg & Co. for not leaving precious billions on the table in their negotiation with the underwriting banks, who had the tough task of gratifying both Facebook and their own brokerage clients.
It went down like this: Facebook obviously wanted to get as much as it could in placing its shares with the banks. It ultimately sold 421.2 million shares at $38 apiece, making the company worth $104.2 billion—which is more than 90 percent of the components in the S&P 500. While today’s price move affects Facebook’s prestige and the paper wealth of its billionaire founders, the key transaction for the social media darling was its sale to the underwriting banks.
Wall Street brokerage clients who were lucky enough to get shares hoped the stock would experience one of those legendary first-day pops. So far, the peak was a $7 jump to $45. Less than an hour later, those who held on were back to anticlimactic break-even.
Look for the deal’s underwriters, including JPMorgan, Goldman Sachs, and Morgan Stanley, to protect Facebook shares from falling below $38—a headline that would make them look bad.
Meantime, it’ll soon be safe to switch back to full-time hand-wringing over Greece.
UPDATE 2:
With its $104 billion valuation, Facebook is now worth more than some of the most widely held stocks in America, from McDonald’s to Cisco. Which means that it, too, will have to be widely held by mutual funds and other institutional investors, especially as Facebook’s clout and size make it a candidate for addition to benchmarks like the S&P 500 and Nasdaq 100.
Some institutional investors have expressed hesitation about buying Facebook on concerns about the site’s growth prospects, people with knowledge of the matter said last week. They could be vindicated by the fact that the shares are struggling to keep their debut offering price of $38. With 15 minutes left in Friday’s session, the stock was at $38.01.
Others have learned to stop worrying and love the boom—and have already gotten started on loading up. According to data compiled by Morningstar (MORN), mutual funds offered by Morgan Stanley and T. Rowe Price (TROW) have dominated the rolls of institutions that bought Facebook on private exchanges ahead of its IPO.
As of March 31, Morgan Stanley Multi-Cap Growth B (CPOBX), which had already stocked up on shares of Amazon.com, Apple, and Google, had 4 percent of its portfolio in Facebook—tops on the list. It was followed by four other Morgan Stanley funds, including Institutional Opportunity H (MEGHX), Institutional Focus Growth I (MSAGX) and Focus Growth B (AMOBX). The top 10 list rounds out with T. Rowe Price Media & Telecommunications (PRMTX) and T. Rowe Price Global Stock (PRGSX). In all, T. Rowe Price funds represent 11 of the top 30 fund holders by percentage weight of Facebook in their portfolios.
The question is who sticks around, and for how long, now that Facebook’s aftermarket pop has not materialized.
UPDATE 3:
A tepid debut. So much for that first day pop to $70, $60, or even $40 for Facebook. At the close of trading, newly minted FB struggled to remain above its $38 offering price, reaching $38.37, then immediately falling back toward $38 in after-hours trading. Which is fine, mind you: The eight-year-old company, which has a knack for getting us to admit things we really shouldn’t and buy imaginary goats we don’t really need, is still worth $104 billion.
But it’s also not fine.
Consider: “Facebook: Failure to Launch” is how the CNN screen above me is putting it, as the stock visited $38.02.
Curiously, Facebook’s stock has doggedly stayed above $38 today, thanks to a constant barrage of big bids at that price. Is it that the IPO’s underwriters, including Morgan Stanley and JPMorgan, are trying mightily to preserve the sanctity of their offer price? Should they maybe have negotiated harder to extract a better deal for their clients from Mark Zuckerberg & Crew? After all, Facebook agreed to pay them less than one-third the 3.6 percent median fee on the 10 largest U.S. IPOs in history before this one, according to data compiled by Bloomberg. (Back in my day, things were out of whack in the other direction.)
True, Facebook’s IPO is as big and prestigious as they come these days; taking a smaller percentage cut now could be a smart investment to land more deals down the road. But delivering a no-pop IPO of this size and import pretty much offsets that trade.
Give props to the 28-year-old in the hoodie for getting the most out of the IPO for his company.
UPDATE 4:
Facebook is No. 1!
Facebook did manage to set a record: More than 560 million shares traded on Friday, marking a new record for a listing’s first day. The prior record holder was General Motors, which had a 458 million-share trading day when it emerged from government ownership in 2010. By 3 p.m. EDT, Facebook accounted for 7 percent of total U.S. stock market volume, and 22 percent of trading in the Nasdaq composite. This all comes in a period where the U.S. market has seen its lowest average volume in five years.
Apparently, the volume made it hard to get a fix on the closing price. As of 4:50, Facebook ended regular trading at $38.23.
2012年5月18日 星期五
Mark Walter, the Moneyman Behind the Dodgers Deal
Mark Walter, chief executive officer of investment firm Guggenheim Partners, is a Chicago resident with Cubs season tickets. When the financially troubled Los Angeles Dodgers franchise went on the market, he didn’t let loyalty get in the way of dealmaking. Walter is the controlling partner of the group—it includes former Los Angeles Lakers player Earvin “Magic” Johnson and baseball executive Stan Kasten—that purchased the Dodgers for $2.15 billion in a deal that closed on May 1.
Walter’s foray into sports ownership doesn’t mean he’s giving up his day job running Guggenheim, where he has refashioned a manager of family money into a global firm that manages more than $125 billion and provides investment banking services. Walter, 51, has built up the company’s offerings in exchange-traded funds, the fastest-growing product in the money-management industry, thanks to the acquisitions of fund providers Claymore Group, announced in 2009, and Security Benefit in 2010. The firm is now one of the 10 largest ETF providers in the U.S. with offerings such as the Guggenheim S&P 500 Equal Weight ETF and Guggenheim BRIC ETF (EEB).
Walter’s growth drive suffered a setback earlier this month when talks to buy three of Deutsche Bank’s (DB) four asset-management units fell apart. Adding those operations would have more than quintupled Guggenheim’s assets and put it on par with the likes of Legg Mason (LM) and Franklin Resources (BEN).
Headquartered in New York and Chicago, Guggenheim Partners was formed in 2000. Its founders include Walter, Peter Lawson-Johnston II, a descendant of Meyer Guggenheim, and Todd Morley, who owned a mortgage securities business. It succeeded Guggenheim Brothers, which had been overseeing family money. The Guggenheims derive their wealth from Meyer, a Swiss tailor who came to the U.S. in the 1840s and made a fortune in mining and smelting. Family money helped bankroll prominent Guggenheim museums in New York and Bilbao, Spain.
As it grew, Guggenheim Partners raised money from outside investors such as Sammons Enterprises, a Dallas company with interests in industrial products and insurance. Today, Guggenheim has more than 2,200 employees at more than 25 offices in nine countries.
For all that, what brought Walter into the spotlight was his deal for the Dodgers, which he did separately from Guggenheim Partners. The price Walter’s group paid may have been as much as $850 million more than the runner-up bid. A rival group of investors led by Steve Cohen, who runs SAC Capital Advisors, offered the next-highest bid at $1.3 billion, a person familiar with the bidding, who asked not to be identified because no one was authorized to speak on the matter, said in March. Walter declined to comment for this story.
Some analysts see the price as reasonable. “A franchise as storied as the L.A. Dodgers often trades based on the same dynamics that a painting might trade on,” says Steve Patterson, president of Houston-based Pro Sports Consulting, which advises professional and college teams on transactions and media deals. “There’s only one L.A. Dodgers franchise.” Those who think Walter overpaid fail to appreciate how much the media rights add to the franchise’s value, Patterson says. The team’s TV contract with News Corp.’s (NWSA) Fox Sports expires after the 2013 season. The bidding for Dodgers rights will “drive a number that’s never been seen before,” he says.
Whatever the merits of the Dodgers purchase, Walter seems likely to keep building Guggenheim Partners. He has hired investing veterans including Henry Silverman, the former chief operating officer of Apollo Global Management, to advise on deals. Silverman joined in March as vice chairman of the investment management business. Guggenheim Partners is still talking with Deutsche Bank about purchasing RREEF, a division that invests in real estate and infrastructure and has €49 billion ($63 billion) under management. Howard Tai, a senior analyst in the capital markets group of Boston-based research firm Aite Group, sees more acquisitions beyond that one. “RREEF by itself won’t satisfy Walter’s appetite for expansion,” he says.
The bottom line: Walter has built Guggenheim Partners into a global money manager with more than 2,200 employees and $125 billion in assets.
Bid & Ask: The Deals of the Week
1. Dusseldorf-based utility E.ON (EOAN) sold its German natural gas pipeline network to a group led by Macquarie Group (MQG) for $4.1 billion, shoring up funds as nuclear earnings decline.
2. Mortgage company Residential Capital declared bankruptcy and will be sold to Fortress Investment Group (FIG) and Nationstar Mortgage Holdings (NSM) for about $2.3 billion.
3. Pipeline Partners Australia made a $1.3 billion cash offer for Hastings Diversified Utilities Fund (HDF), an Australian natural gas pipeline owner, trumping a bid made last year by APA Group (APA).
4. U.S. oil and natural gas developer Concho Resources (CXO) will acquire the oil and gas assets of closely held Three Rivers Operating for $1 billion to expand its operations in Texas.
5. Piramal Healthcare (PIHC), controlled by Indian billionaire Ajay Piramal, will pay $635 million for health-care research provider Decision Resources Group.
6. Northern Iron (NFE), an iron-ore producer with assets in Norway, rejected an initial takeover offer of as much as $476 million from Aditya Birla Group.
7. Global professional services company Towers Watson (TW) will pay $435 million for Extend Health, which operates the largest private Medicare exchange in the U.S.
8. The No.?1 uranium producer, Cameco (CCJ), is buying trader Nukem Energy for $135 million to boost sales of nuclear fuel from non-mining sources such as decommissioned Russian warheads.
9. New York-based Shutterstock, an online seller of stock photos and images, filed to raise $115 million in a U.S. initial public offering.
10. A charity auction of jewels owned by the Brazilian-born billionaire Lily Safra raised $37.5 million. A ruby and diamond ring fetched $6.6 million, an auction record for rubies. The proceeds will go to 20 charitable institutions.
Clockwise from top: Dorling Kindersley/Getty Images; Theodore Gray/Visuals Unlimited/Corbis; Courtesy Christie's; Milton Montenegro/Photodisc/Getty ImagesNine Things You Should Know About Facebook's IPO
Facebook could be worth nearly $140 billion by today’s market close
The social network priced its shares at $38 apiece, valuing the company at $104 billion. The average first-day “pop” for a technology company is 32 percent; if Facebook follows that trend, it’ll be worth $137 billion by day’s end. But there’s little about Facebook that’s average, including its public offering. This is the technology’s biggest initial public offering and history’s second-biggest IPO, period, and it will raise about $16 billion. Statistics suggests that the first-day pop—if there is one—will be more modest than average.
A lot of the smart money is getting out
Early investors such as the venture capital firm Accel Partners are selling an unusually high number of shares. Nearly 60 percent of the stock sold today comes from insiders, compared to 37 percent for Google (GOOG) when it went public in 2004. Goldman Sachs (GS) is selling about half its stake, far more than the firm initially planned. “If you really thought that 12 months later the stock would be 50 percent higher, you wouldn’t leave that on the table,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan, told Bloomberg News.
To justify its valuation, Facebook will need to annoy its users …
Thanks in large part to General Motors’s (GM) decision to de-friend Facebook, there are a lot of questions about the efficacy and future of Facebook’s ad-dominant revenue model. And it has high expectations to live up to: The $38 price gives Facebook a whopping 107 price-to-earnings ratio. (For comparison, Apple’s (AAPL) is around 13.) To dramatically boost ad revenues, the two best options are either to put more ads on the site—which would annoy users—or find more places to put ads. The latter means creating a network of ad inventory across the Web, much the way Google’s Doubleclick sells ads and places them on sites like that of the New York Times (NYT). This would give Facebook far greater reach, but could also give users the creeps. Imagine updating your Facebook status (“Really loving that new Carly Rae Jepsen song!”) and then seeing ads to buy the track Call Me Maybe at every site you visit.
… or do something besides advertising
Currently Facebook’s only source of non-ad revenue is its digital currency, Facebook Credits, which people use to buy virtual goods, such as tractors in FarmVille (ZNGA). During the first quarter of 2012, payments grew to make up almost 18 percent of Facebook’s revenue—close to $200 million in total. Overall, though, fewer than 2 percent of Facebook’s users have bought virtual goods with their payments option. There’s a lot of potential growth, in other words, along with hints that a big online operator such as Spotify may begin accepting Facebook Credits in the future.
Facebook has plenty of revenue options beyond payments and advertising
Facebook is a force: It accounts for 9 percent of all online visits in the U.S., according to Experian Hitwise, a company that measures website traffic. Hitwise also says that Americans spend an average of 20 minutes per Facebook visit. Worldwide, nearly 1 billion people have a Facebook profile. As investor Chris Dixon puts it, Facebook has real assets—including “a vast number of extremely engaged users, its social graph, Facebook Connect”—and should be able “to monetize through another business model,” apart from advertising. It could create the Social Smartphone, sell data analytics products, charge for higher-res photo and video storage, or perhaps hawk vintage Mark Zuckerberg hoodies.
There’s already a “Facebook Mafia”
Heard of the PayPal Mafia? Former executives from the online-payment provider have gone on to start big-time tech firms, such as LinkedIn (LNKD), Yammer, and Yelp (YELP). (And one member, Peter Thiel, cut the first big check for Facebook.) A Facebook Mafia has already emerged, and members have founded Asana, Path, and Quora. The Facebook Mafia is real, even though the name could use some work, says Dave Morin, Path’s chief executive officer, who previously developed Facebook’s development platform. “I guess we can’t escape from calling it that,” he says.
Facebook goes where Google won’t in photos
Facebook owns one of the largest photo repositories in the world, and its facial-recognition technology is getting a workout scanning them all, with more than 300 million photos uploaded per day. Facebook stores 60 billion images, a whopping 1.5 petabytes of data. For each uploaded photo, Facebook stores four images of different sizes. The site shows as many as 550,000 images per second. This is an area that has upset privacy critics and represents something that Facebook is willing to do that even Google isn’t: Google’s Eric Schmidt said last year that the company had built an app that would let people snap photos of others and identify who they are but decided not to release it, due to privacy concerns. Google and Facebook both have sophisticated facial-recognition technology, but Google requires users to opt into its photo-tagging service. Facebook users are included automatically.
Facebook’s new campus could be cursed
Late last year the social network moved into a 57-acre site in Menlo Park that was previously inhabited by Sun Microsystems. Sun’s fortunes soured shortly after the computer company took up residence there. The same thing has happened, in different times and places, to software-maker Borland, Silicon Graphics, and even Apple (which nearly went bankrupt three years after it moved into its current Cupertino, Calif., headquarters at 1 Infinite Loop). The good news: Companies that move into pre-existing campuses seem to fare better. Google, for instance, took up residence in SGI’s old digs.
Up north, Facebook is the only thing better than hockey
Facebook is one of the top two websites in every country except China. The social-networking site is most loved in Canada, where it wins 12 percent of all online visits.
With Barrett Sheridan, Douglas MacMillan, Jordan Robertson, Mark Milian, Peter Burrows, Karen Weise, and Caroline WinterWhy Foreign Banks Are Shunning American Millionaires
Affluent Americans need not apply. That’s what some of the world’s largest wealth management firms are saying in anticipation of Washington’s implementation of the Foreign Account Tax Compliance Act, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings (HBC), Deutsche Bank (DB), Bank of Singapore, and DBS Group Holdings (DBS) all say they have turned away business from U.S. clients. The attitude of American regulators is “Draconian,” says Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender. “I don’t open U.S. accounts, period.”
The 2010 law, to be phased in starting on Jan. 1, 2013, will mean additional compliance costs for banks and fewer investment options for U.S. citizens living abroad. Known as Fatca, it requires financial institutions based outside the U.S. to obtain and report information about income and interest payments added to the accounts of American clients. The Internal Revenue Service held a hearing on the rules on May 15 and could change some aspects of the law.
Jim Spellman/WireImage/Getty ImagesNo longer a U.S. citizen, Saverin may save on his Facebook tax bill
Penalties for not complying will be stiff. Non-U.S. firms that don’t make required disclosures will be subject to 30 percent withholding of certain dividends, interest, or proceeds from the sale of assets they or their customers receive from U.S. sources, according to Richard Weisman, Hong Kong-based head of law firm Baker & McKenzie’s global tax practice. “Overwhelmingly, financial institutions outside the U.S. don’t like it, for obvious reasons,” says Weisman, calling the withholding tax a “stick” the U.S. is wielding. “The U.S. is outsourcing a tax-compliance function, which is enormously expensive.”
The U.S. government needs to be tougher on offshore tax crimes than it has been, says U.S. Representative Richard Neal, a Massachusetts Democrat and one of the sponsors of the legislation. Fatca, introduced after Zurich-based UBS (UBS) said in 2009 that it aided tax evasion by Americans and agreed to pay $780 million to avoid prosecution in the U.S., is already helping to improve banking transparency, he says. “The IRS should know what money is being held offshore and for what purpose,” Neal says. “I don’t think there’s anything unreasonable about that.” UBS hasn’t taken U.S. clients at its offshore wealth management units since 2008.
Bank of Singapore, the private-banking arm of Oversea-Chinese Banking Corp., has declined to accept millions of dollars from Americans because it doesn’t want to deal with the regulatory hassle, according to Chief Executive Officer Renato de Guzman. “It’s too complex, too challenging,” he says. “You probably should have a dedicated team to handle them or to understand what can be done or what cannot be done.”
Some U.S. citizens are sidestepping the new tax reporting concerns—and possibly saving money—by renouncing their citizenship. A record 1,780 gave up their U.S. passports last year, compared with 235 in 2008, according to the IRS. One of them was Eduardo Saverin, the billionaire co-founder of Facebook. The move may reduce his tax bill as Facebook completes an initial public offering that values the social network at more than $100 billion. Brazilian-born Saverin is a resident of Singapore.
If Americans choose to bank with a non-U.S. firm such as HSBC, their investment choices are limited. At the HSBC branch in the bank’s Asia regional headquarters in Hong Kong, Americans can only make savings deposits. HSBC decided last July that it would no longer offer wealth management services to Americans from locations outside their home country after tax authorities stepped up a probe of the London-based bank’s U.S. clients. Americans would be “better served” by private bankers in the U.S., Goh Kong Aik, a spokesman for the firm in Singapore, said in an e-mail.
Royal Bank of Canada (RY) says it sees a chance to pick up customers turned away by other banks. “We are one of the few wealth managers to hold a Securities and Exchange Commission license offering U.S.-compliant investment advice in Switzerland and London,” says Barend Janssens, the Singapore-based head of the bank’s wealth management unit for emerging markets. The bank sees “an opportunity in accepting tax-compliant U.S. persons as clients outside of the U.S.”
The growth in wealth in Asia makes it easier for banks to refuse Americans. Asia has the world’s fastest-growing number of people with more than $1 million in investable assets, according to a report last year by Bank of America and Capgemini, a management consultant. The number of millionaires in Asia climbed 9.7 percent in 2010, to 3.3 million, higher than the 8.6 percent growth in North America. The combined wealth of Asian millionaires increased to $10.8 trillion, topping Europe for the first time, the report said. At industry meetings he attends in Singapore, not accepting U.S. clients is “quite a prevailing sentiment,” says de Guzman of Bank of Singapore. “We have enough business in Asia, so we don’t want to make our lives too difficult.”
The bottom line: To avoid increased reporting costs and potential penalties, many foreign banks are restricting their dealings with U.S. clients.