FXall IPO underwriters initiate research coverage

FXall’s underwriter’s predictably have near-identical price targets.

The next step in FXall’s life as a public company was taken last week, with several of the investment banks which underwrote FXall’s IPO last month coming out with investment research on the company.

None of the analysts now covering FXall had much original to say, each coming out with either a $16 or $17 share price “target” for FXall. The investment banks which rated FXall “Neutral” (Goldman, Citi and JP Morgan) basically said that near-term upside is limited, citing the rise in FXall’s share price since IPO for the so-so rating. FXall shares are up 27% (to $15.24) from its IPO price of $12.

Although reforms of the IPO process in the U.S. last decade were supposed to separate the underwriting and research functions – that is, underwriters are not allowed to promise research coverage (and certainly not “positive” research coverage) in order to secure a spot in the underwriting group – it is not really surprising that the Wall Street firms which initiated research were all in FXall’s underwriting group, and all had a “target price” for FXall shares well above the IPO price.

Over the next few days we would expect the other underwriters, including lead-manager BofA Merrill Lynch, to also come out with research coverage. Stay tuned….

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