Monday, November 16, 2009

Cantor Fitzgerald open to going public

Cantor Fitzgerald, a private investment bank in New York City, lost more than two-thirds of its employees in the World Trade Center on 9/11.  Today, chief executive, Howard Lutnick, discussed the future of the company at the Reuters Global Finance Summit in New York:
Cantor Fitzgerald, a private investment bank growing by leaps and bounds, for the first time said it is considering going public as it accelerates expansion plans in a world without rivals such as Bear Stearns and Lehman Brothers.

"Could Cantor Fitzgerald become a public company? Sure," Chief Executive Howard Lutnick said at the Reuters Global Finance Summit in New York on Monday.

"You know we're not wrestling with (that option) today because we just raised $500 million. The next step will be, what's our next move? We'll have lots of opportunities. Going public is just one of them," he said.

Cantor is a closely held partnership known as one of the world's largest brokers of bonds between securities dealers. It survived the deaths of 658 of the firm's 960 New York employees in the September 11, 2001, attack on the World Trade Center.

Under Lutnick, Cantor has thrived, expanding into institutional bond trading, building up equities and investing in a number of new businesses.

The firm, now based on the lower floors of a nondescript building in midtown Manhattan, recently sold $500 million of debt in a private placement to give it $1.5 billion of capital.

Lutnick said Cantor does not need to raise new money at the moment, but acknowledged its hiring and expansion ambitions are now greater than ever.
The collapse of Bear Stearns and the bankruptcy of Lehman Brothers were seismic failures in the global financial world.  But the world turns on, and Cantor Fitzgerald perseveres and prospers in the short term vacuum.  It's the natural outcome of a quaint relic known as capitalism.  You might take a cue from the Lion King, and call it the "circle of life."

It makes one wonder what the automobile manufacturing industry would be like today, if the government has just decided to let GM and Chrysler file for bankruptcy instead of launching a short term bid to bail them out.  Now they are both bankrupt, and much of the TARP money that provided them a short term IV will not be recovered.  (I know that the MSM is covered over today with glowing stories about GM paying back its $6.7 billion four years early, but did you see the part where they lost $1.15 billion?)  Ditto for CIT (the fifth largest bankruptcy in U.S. history) that received $2.3 billion in federal bailout funds.  That money, OUR money, is gone.

Just moments ago, the Wall Street Journal gives us this:
U.S. regulators have seized or threatened at least 27 banks that received capital infusions from the Troubled Asset Relief Program, including some lenders that government officials knew were troubled when they awarded the money.

The troubles put taxpayers at risk of losing as much as $5.1 billion invested in the banks since TARP was launched in October 2008. For example, Friday's three bank failures, increasing the 2009 total to 123, included a unit of Pacific Coast National Bancorp, a San Clemente, Calif., bank that sold $4.1 million of preferred shares to the Treasury Department in January.

"There are going to be more losses," predicts Jeff Davis, a banking analyst at FTN Equity Capital Markets Corp. in Memphis, Tenn.
I take deep and personal comfort in the amazing rebound of Cantor Fitzgerald.  I don't know anyone that works there now, and I did not know anyone who was killed in 9/11.  But if ever a worst case Harvard Business Review case study was to be written about a company doomed to certain failure, Cantor Fitzgerald would have been that company.  God bless them.

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