Tombstone advertisements play important roles in the equity offering process conducted by investment banks. As financial intermediaries that help companies raise capital through equity issuance, investment banks rely heavily on their reputation when conducting public offerings. Tombstones help establish the reputation and build the prestige of investment banks by showcasing their roles in major transactions. Though seemingly trivial, tombstones signify the capabilities of investment banks and cement their status in the market.
Tombstones Showcase Investment Banks’ Capabilities
Tombstone advertisements are published after the registration statement becomes effective but before the final prospectus is issued. They provide basic details about an offering such as the issuer, type of security, amount issued, and the investment banks involved. The banks are grouped into different tiers based on their underwriting percentage, with more prestigious banks occupying higher tiers. As such, tombstones serve as a form of advertising for investment banks, allowing them to highlight their capabilities in handling large, complex transactions. Frequent appearances in tombstones, especially in top tiers, boost the reputation of investment banks.
Tombstones Cement Investment Banks’ Market Status
In addition to showcasing capabilities, tombstones also cement the status and competitive positioning of investment banks. Given the emphasis placed on league table rankings, investment banks pay close attention to the tier they are assigned in tombstones. Relegation to a lower tier is seen as a blow to their prestige and competitive standing. As such, tombstones play a key role in solidifying the pecking order among investment banks, with frequent top billing underscoring market leadership.
Tombstones Chronicle Investment Banks’ Deal Flow
Tombstones provide a historical record of the transactions an investment bank has been involved in. They chronicle the deal flow and clientele of a bank over time. A long list of tombstone appearances can serve as a proxy for market experience and competitiveness. Moreover, tombstones also indicate the types of offerings and industries a bank specializes in based on the tombstones it appears in. As such, tombstones provide visibility into the track record and specialization of investment banks.
Tombstones’ Signaling Impact on Investment Banks’ Business
The signaling impact of tombstones can have tangible business implications for investment banks. Companies looking to raise capital often use tombstone appearances as an initial filter when selecting potential underwriters. Similarly, institutional investors may focus their dialogue on banks with established expertise relevant to the issuer. On the flip side, the lack of tombstone visibility in a sector can impede an investment bank’s competitiveness in winning new mandates. As such, tombstones play an important role in shaping business flows and deal volumes for investment banks.
In summary, tombstone advertisements play multifaceted roles in establishing the reputation, status, capabilities and sector expertise of investment banks involved in equity offerings. Though seemingly trivial, careful tombstone management is crucial for investment banks in cementing their competitive positioning and winning new business.