"In 1984, Eric Dobkin was working for Goldman Sachs Group Inc., selling large blocks of stocks to fund managers, when he was handed an assignment: The bank ranked ninth in equity underwriting. Fix it.
Dobkin, then 41, spent a few sleepless nights mulling the problem. At the time, initial public offerings were a scattered affair, as thousands of regional brokers hawked the paper to retail investors.
It finally hit him one morning in the shower, he said. If Goldman Sachs could sell equities to institutions, it could surely sell more initial offerings to them as well. Thus was born Wall Street’s new model for IPOs, earning Dobkin credit as the father of the modern-day way companies raise capital. By tapping money managers like Fidelity Investments, the change vastly broadened the pool of investors, while enhancing banks’ role as middlemen in pricing and stock allocation.
“I almost kick myself -- it became too obvious,” Dobkin, now 71, said in a rare interview at Goldman Sachs’s Manhattan headquarters. The new model “created a long-term relationship between companies and investors that really was the secret sauce of what this turned out to be.”
Almost 30 years later, IPOs are soaring -- topped by Alibaba Group Holding Ltd.’s proposed share sale -- revealing the transformation that has taken place since 1985. Companies globally raised $150 billion last year, up from $1.3 billion in 1980, adjusted for inflation, according to data compiled by Bloomberg. Alibaba’s IPO, expected to raise at least another $20 billion, shows how they’ve become global affairs that depend on the deep pockets of professional money managers and pension funds".
Source: Bloomberg
