Stockbrokers are not your mates

Just remember…..irrespective of the merits on the underlying investment opportunity, you can stop thinking that stockbrokers and investment bankers are your friends.

In late 2024, an Australian data centre operator called DigiCo went public. It was planning on raising A$1.6bn and $362m of those funds garnered from investors would be directed or paid to “offer costs”.

The Australian Financial Review (AFR) article went on to say, “Its 12 brokers – including four underwriters JPMorgan, Goldman Sachs, UBS and Macquarie Capital – will split $107.4 million among themselves. Pretty much everyone who is anyone in stockbroking (and hasn’t pledged allegiance to NEXTDC) has scored a role, including CommSec. That’s 6.5 per cent of the IPO proceeds gone.”

https://www.afr.com/street-talk/price-of-entry-to-di-pilla-s-4b-data-centre-reit-is-steep-20241113-p5kq8v

DigiCo’s IPO was priced at $5.00.

In today’s AFR, the headline is “Investment bankers set for $215m fee bonanza in Firmus float”.

https://www.afr.com/companies/financial-services/investment-bankers-set-for-215m-fee-bonanza-in-firmus-float-20260930-p6110l

So, when you get the ‘hot and heavy’ phone call from your ‘friendly’ investment advisor about the hottest, latest, sexiest IPO……keep this quote from Charlie Munger in mind….

“Show me the incentive and I’ll show you the outcome”