The stock of Arlington investment-banking firm Friedman, Billings, Ramsey Group Inc. soared 20 percent after it announced plans yesterday to sell initial public offerings of stock through the retail discount brokerage network of Boston mutual fund giant Fidelity Investments.
FBR shares closed at $9.50, up $1.62 1/2, on the New York Stock Exchange. The rise was a big boost for a stock that was trading above $20 a share in April but recently has been selling for under $10.
The deal with Fidelity Brokerage comes four months after FBR announced plans to sell IPOs over the Internet and to other online investing services. Both moves expand the universe of customers for FBR's investments. Fidelity Brokerage, with 2.8 million customers and $461 billion in assets under management, is the second-largest discount stockbroker.
"Fidelity is an extremely large retail distribution channel," Emanuel J. Friedman, FBR's chairman and chief executive, said yesterday. "They're looking for product, and we're an originator of product."
Friedman said the two firms will concentrate on selling investments in the technology, real estate, regional banking, energy and health care sectors. The investments will include both stocks and debt issues, he said.
Until last year, FBR was the nation's largest underwriter of new and secondary stock issues outside of Wall Street, but its business fell last summer when the IPO market hit a downdraft.
In the past, FBR has achieved success financing companies often shunned or pushed aside by bigger Wall Street firms. Its most notable success came in 1993 when it helped recapitalize Glendale Federal, an ailing savings and loan. Last year, FBR raised $345 million in the first real estate investment trust for a group of area car dealers known as Capital Automotive Group. This year it has been involved as the lead or co-manager in deals worth more than $900 million. "We have demonstrated the ability to develop innovative transactions and to execute large deals, and I believe this ability is one of the reasons we hold appeal for Fidelity," Friedman said in a statement to analysts posted on the company's World Wide Web site.
FBR has relied previously on smaller, regional brokerages such as Piper, Jaffray & Co. in Minneapolis to sell its initial stock offerings.
"This is much easier, because you're going to one person over and over again," Friedman said, adding that Fidelity has vast computer resources that allow it to "data-mine" its retail customer accounts for potential clients.
Fidelity has a similar distribution deal with Lehman Brothers Inc. and has announced plans to sell IPOs underwritten by W.R. Hambrecht & Co.
"We were the first discount brokerage to offer IPOs to our customers," said Fidelity spokesman James Griffin. "We've had considerable demand for IPOs within our customer base."
FBR and Fidelity are joining forces at a time when the new-issues market has cooled from its torrid pace of earlier this year as prices for Internet-related stocks have fallen from their peaks by as much as 50 percent in some cases.