The Rothschilds are so done with the markets

The family is taking its storied boutique bank private. Minority shareholders are on the spot

What’s the point of being listed? Even the bankers are wondering. Rothschild & Co.’s controlling family wants to take it private, arguing investors don’t appreciate the storied boutique bank’s long-term potential. It’s the latest case of private buyers exploiting stock-market indifference.

In the US, the trend for financial firms has been in the other direction: Entrepreneurial advisory shops specialising in mergers and acquisitions have been lining up to go public since Goldman Sachs Group Inc. became the last major Wall Street firm to take a listing in 1999. Perella Weinberg Partners’s merger with a blank-check firm reinforced the trend.

The attractions of going public are clear enough for such boutiques. Selling a stake enables founders to cash in and creates equity that can be used to reward staff. An initial public offering is the default route simply because a sale to another financial firm is hard to engineer. The bulge-bracket firms don’t need to buy you; and private equity funds are going to drive a hard bargain.

But things are more complicated over at Rothschild. For all its history, Rothschild is another mid-cap European stock that’s thinly traded and suffers limited analyst coverage.

Concordia — the Rothschild family’s holding company and the dominant shareholder — says the bank doesn’t need access to the equity market for capital, and suggests the business is being assessed by investors only on “short-term earnings.” The family has been looking to increase ownership, not shed it.

You can see the frustration with the market. Rothschild has performed well operationally, but you wouldn’t think so from the share price. The stock was trading at 7.5 times next-12-month earnings prior to the take-private bid emerging on Monday. US peers trade on 16 times. Rothschild trades on a 10 percent premium to book value, again below the US sector.

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