FINRA Fines 10 Firms for Offering Favorable Research Coverage in Connection with Toys “R” Us IPO

The Financial Industry Regulatory Authority (FINRA) has fined 10 firms a total of $43.5 million for allowing their equity research analysts to solicit investment banking business and for offering favorable research coverage in connection with the 2010 planned initial public offering of Toys “R” Us.

FINRA fined the following firms: Barclays Capital Inc., $5 million; Citigroup Global Markets Inc., $5 million; Credit Suisse Securities (USA), LLC, $5 million; Goldman, Sachs & Co., $5 million; JP Morgan Securities LLC, $5 million; Deutsche Bank Securities Inc., $4 million; Merrill Lynch, Pierce, Fenner & Smith Inc., $4 million; Morgan Stanley & Co. LLC, $4 million; Wells Fargo Securities LLC, $4 million; Needham & Company LLC, $2.5 million.

In April 2010, Toys “R” Us and its private equity owners invited these 10 firms to compete for a role in Toys “R” Us’ planned IPO. FINRA found that each of the 10 firms used its equity research analyst as part of its solicitation for a role in the IPO. Specifically, Toys “R” Us asked equity research analysts from each of the 10 firms to make separate presentations to Toys “R” Us’ management and sponsors for the purpose of ensuring that the analysts’ views on key issues, including valuation factors, were aligned with the views expressed by the firms’ investment bankers. [Read more...]

Toys “R” Us Withdraws Proposal for IPO

Toys “R” Us has withdrawn its proposal for an initial public offering, according to filings with the U.S. Securities and Exchange Commission. The big box toy retailer originally filed plans for an IPO on May 28, 2010 with the SEC. The company pulled the IPO on Friday due to “unfavorable market conditions, and the company’s recently announced executive leadership transition,” according to a news release.

The company had postponed its IPO in 2011 due to weak market conditions, and it has continued to struggle with weak sales. Last month, Gerald Storch announced he would step down as the Toys “R” Us CEO, while remaining as chairman of the board, after joining the company in 2006 following an acquisition by investment group Bain Capital Partners, Kohlberg Kravis Roberts & Co., and Vornado Realty Trust.

On Friday the company released its fourth quarter and full year financial results for 2012. In the fourth quarter, net sales were $5.8 billion, a decrease of $155 million compared to the prior year. For the full year, net sales were $3.5 billion, a decrease of 2.1 percent versus the prior year, driven by a comparable store net sales decline of 4.5 percent.

Toys R Us Files for IPO

Toys”R”Us, Inc. announced that it has filed a preliminary registration statement with the United States Securities and Exchange Commission relating to a proposed initial public offering of its common stock. It is anticipated that the offering will consist of newly issued shares sold by Toys”R”Us, Inc.; however, the number of shares to be offered and the price range for the offering have not yet been determined. The company expects to use the net proceeds it receives from the proposed offering primarily to pay down certain existing indebtedness, and the remaining net proceeds, if any, for general corporate purposes.
Goldman, Sachs & Co., J.P. Morgan, BofA Merrill Lynch, and Credit Suisse are serving as joint book-running managers and representatives of the underwriters for this proposed offering. Deutsche Bank Securities, Citi, and Wells Fargo Securities are also acting as joint book-running managers.