Investment bank Donaldson Lufkin & Jenrette said Wednesday that it will publicly offer a tracking stock for its DLJdirect business, a move that will allow the company to capitalize on the current demand among investors for internet brokerage stocks. New York-based DLJ has filed a preliminary registration statement with The Securities and Exchange Commission for the proposed IPO, although no offering size or price range was indicated. The filing allows for a maximum offering value of $138m.
The move has been expected since January, when the bank said it would make a decision this quarter about spinning out the online business, and comes after a number of companies, including the likes of Barnes and Noble Inc and CompUSA Inc have carried out similar plans in an attempt to unlock some of the value of their internet businesses. In its last quarterly earnings report, the bank said DLJdirect saw revenues of $117.9m in 1998, up 61% from the prior year. Client assets in DLJdirect accounts nearly doubled to $8.9bn and the average number of trades per day in 1998 increased 87% to 11,400.
In terms of daily trades, DLJ’s service ranks seventh among online securities trading houses, according to the latest figures available. But given the appetite for internet-related stocks, its value to DLJ as a separate unit could prove immense. Based on the multiples of similarly-sized online brokerages, DLJdirect could end up with a market capitalization of well over $2bn – roughly a quarter of DLJ’s overall market cap – despite contributing only about 2% of the bank’s overall revenue last year.
The bank said that it will allocate the net proceeds from the offering to DLJdirect, which plans to use the cash to fund increases in marketing expenditures, for international expansion, to repay a note to DLJ and for other general corporate purposes. DLJ will be the lead manager of the offering and DLJdirect itself will act as the exclusive internet distributor. The offering is expected to be carried out some time during the second quarter of this year, with DLJ holding on to all the shares not sold to the public. Following the offering, a separate issue will trade alongside DLJ under the symbol DIR.
