L.F. Rothschild
Encyclopedia
L.F. Rothschild was a merchant
and investment banking firm based in the United States
and founded in 1899. The firm collapsed following the 1987 stock market crash
.
group as well as retail brokerage and wealth management
operations.
Following its merger with C.E. Unterberg, Towbin
in 1977, the firm was known as L. F. Rothschild, Unterberg, Towbin and was led primarily by Thomas I. Unterberg and A. Robert Towbin. The firm was known for its merchant banking investments, particularly in high-technology companies. In the early 1980s, the firm emerged as the leading underwriter of initial public offering
s, surpassing the elite investment banks (at the time, including Lehman Brothers
, Goldman Sachs
and Morgan Stanley
). Among the companies they took public were Intel, Cray Research
and biotechnology company Cetus Corporation
.
In 1986, just ten years after merging with L.F. Rothschild, Towbin and Unterberg left the firm to join Shearson Lehman. The split was attributed to their opposition to plans to expand the firm's bond sales and trading operations. However, in the negotiations with outside firms related to that expansion and capital infusion, at least one particularly attractive offer required that Unterberg and Towbin step down from management positions or leave the firm. Hard feelings between senior management that resulted by considering that offer were believed to be the causal factor behind their departure by most insiders. Ultimately, the firm's stock trading exposure during the stock market crash in 1987 led directly to its demise. Towbin and Unterberg would leave Lehman four years later, in 1990 to form C.E. Unterberg, Towbin
.
The firm suffered heavy losses in the 1987 stock market crash
and was acquired by Kansas-based Franklin Savings Association in February 1988. However, even with new capital, the firm's holding company, L. F. Rothschild Holdings Inc. filed for Chapter 11 bankruptcy protection in July 1989. By the end of 1989, the firm had gone from a peak of 2,200 employees to 45 employees.
Merchant bank
A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms they lend to....
and investment banking firm based in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and founded in 1899. The firm collapsed following the 1987 stock market crash
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...
.
History
L.F. Rothschild & Co. was founded in 1899 by Louis F. Rothschild (1869–1957). Together with partner Leonard Hochstadter, Rothschild took up the offices and business of Albert Loeb & Co. at 32 Broadway. The firm's primary business was sales and trading of fixed income securities. The firm also had an arbitrageArbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
group as well as retail brokerage and wealth management
Wealth management
Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services...
operations.
Following its merger with C.E. Unterberg, Towbin
C.E. Unterberg, Towbin
C.E. Unterberg, Towbin, was a United States investment bank. Founded as C.E. Unterberg & Co. in 1932 by Clarence E. Unterberg, the firm changed its name to C.E Unterberg, Towbin & Co., in 1953.The firm began as a niche over-the-counter trading firm...
in 1977, the firm was known as L. F. Rothschild, Unterberg, Towbin and was led primarily by Thomas I. Unterberg and A. Robert Towbin. The firm was known for its merchant banking investments, particularly in high-technology companies. In the early 1980s, the firm emerged as the leading underwriter of initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
s, surpassing the elite investment banks (at the time, including Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
and Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
). Among the companies they took public were Intel, Cray Research
Cray
Cray Inc. is an American supercomputer manufacturer based in Seattle, Washington. The company's predecessor, Cray Research, Inc. , was founded in 1972 by computer designer Seymour Cray. Seymour Cray went on to form the spin-off Cray Computer Corporation , in 1989, which went bankrupt in 1995,...
and biotechnology company Cetus Corporation
Cetus Corporation
Cetus Corporation was one of the first biotechnology companies. It was established in Berkeley, California in 1971, but conducted most of its operations in nearby Emeryville. Before merging with another company in 1991, it developed several significant pharmaceutical drugs as well as a...
.
In 1986, just ten years after merging with L.F. Rothschild, Towbin and Unterberg left the firm to join Shearson Lehman. The split was attributed to their opposition to plans to expand the firm's bond sales and trading operations. However, in the negotiations with outside firms related to that expansion and capital infusion, at least one particularly attractive offer required that Unterberg and Towbin step down from management positions or leave the firm. Hard feelings between senior management that resulted by considering that offer were believed to be the causal factor behind their departure by most insiders. Ultimately, the firm's stock trading exposure during the stock market crash in 1987 led directly to its demise. Towbin and Unterberg would leave Lehman four years later, in 1990 to form C.E. Unterberg, Towbin
C.E. Unterberg, Towbin
C.E. Unterberg, Towbin, was a United States investment bank. Founded as C.E. Unterberg & Co. in 1932 by Clarence E. Unterberg, the firm changed its name to C.E Unterberg, Towbin & Co., in 1953.The firm began as a niche over-the-counter trading firm...
.
The firm suffered heavy losses in the 1987 stock market crash
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...
and was acquired by Kansas-based Franklin Savings Association in February 1988. However, even with new capital, the firm's holding company, L. F. Rothschild Holdings Inc. filed for Chapter 11 bankruptcy protection in July 1989. By the end of 1989, the firm had gone from a peak of 2,200 employees to 45 employees.
Notable alumni
Among the notable alumni of L.F. Rothschild are :- Thomas H. LeeThomas H. LeeThomas H. Lee is an American businessman, financier and investor and is credited with being one of the early pioneers in private equity and specifically leveraged buyouts. Thomas H. Lee Partners , the firm he founded in 1974, is among the oldest and largest private equity firms globally...
, the private equity investor who founded Thomas H. Lee PartnersThomas H. Lee PartnersThomas H. Lee Partners is a private equity firm based in Boston, Massachusetts specializing in leveraged buyouts, growth capital, special situations, industry consolidations, and recapitalizations....
in 1974
- John Angelo and Michael Gordon who left the firm in 1988 to found Angelo, Gordon & Company.
- Daniel ScottoDaniel ScottoDaniel "Dan" Scotto is an American financial analyst. In August 2001, as an analyst with BNP Paribas, Scotto downgraded Enron securities from "Buy" to "Neutral". He took this action four months before the Enron accounting scandal was revealed that led to the company's bankruptcy. Scotto claims...
— former Director of Research, joined the firm in 1982, currently President and CIO of Whitehall Financial Advisors LLC.
- Jordan BelfortJordan BelfortJordan Belfort is an American author, motivational speaker and former white collar criminal who spent 22 months in jail for offences related to stock market manipulation and running a boiler room....
.
Further reading
- Belfort, JordanJordan BelfortJordan Belfort is an American author, motivational speaker and former white collar criminal who spent 22 months in jail for offences related to stock market manipulation and running a boiler room....
. The Wolf of Wall Street. New York: Bantam BooksBantam BooksBantam Books is an American publishing house owned entirely by Random House, the German media corporation subsidiary of Bertelsmann; it is an imprint of the Random House Publishing Group. It was formed in 1945 by Walter B. Pitkin, Jr., Sidney B. Kramer, and Ian and Betty Ballantine...
, 2007. ISBN 9780553805468.