Caveat banker

8 December 2009 By Alexander Smith

A Dutch court recently ruled that investment banks have a duty of care to investors in new issues. That may lead to improved IPO due diligence. The risk is that advisers use this as an excuse to charge higher fees for what they ought to be doing in the first place.

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The Dutch Supreme Court ruled in late November that ABN AMRO and Goldman Sachs had misled investors during the 12 billion euro flotation of World Online in 2000. The banks were jointly global coordinator, lead manager and bookrunner of the initial public offering.

World Online stock plunged after it became known that the chief executive had sold shares far below the IPO price before the stock was floated.

Bankers expect a flood of European IPOs in the first half of 2010, after a prolonged period of reduced activity in the market.

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