Over the past year, the surge in M&A and private equity has boosted the stock prices of companies like Goldman Sachs (NYSE: GS ) and Morgan Stanley (NYSE: MS ) . But not all investment banks have benefited, which is certainly the case with Thomas Weisel Partners (Nasdaq: TWPG ) . Still, if the tech market continues to improve, TWP's stock may get out of its funk.
In the fiscal fourth quarter, revenues increased from $75.2 million to $79.6 million, and net income increased from $7.1 million to $8.7 million. (There's no earnings-per-share comparison because, in the fourth quarter of 2005, the company was privately held.)
There was certainly lots of M&A and IPO activity in the fourth quarter, with TWP's investment banking revenues increasing 33% to $37.3 million (the biggest quarter since 2001). Some of the deals include the IPOs of Double-Take Software and Netlist, as well as advisory engagements on AT&T's (NYSE: T ) sale of USinternetworking and Nomura Holdings' $1.2 billion purchase of Instinet.
TWP is also reaping the benefits from its private equity investments. That is, over the years, the firm has set up a variety of funds to invest in early-stage companies. As these portfolio investments go public or sell out, it turns into nice gains. Keep in mind that, for the typical private equity fund, the manager gets 20% to 25% of the gains.
What does this mean for TWP? Well, in the fourth quarter, the firm scored $5.9 million in earnings from private equity investments -- more than double last year.
Takeaway
CFO Robert West recently left the TWP. This should always be a red flag; then again, turnover is common in the financial services industry. For example, look at the recent CFO departures at Bank of America (NYSE: BAC ) , Citigroup (NYSE: C ) , and Charles Schwab.
Of course, the most critical person for TWP is Mr. Weisel, who is a legend in tech finance. In the late 1970s, he co-founded Montgomery Securities, which he sold to NationsBank in 1997.
During the fourth-quarter conference call, Mr. Weisel was definitely upbeat on the tech space. So far this year, TWP is engaged with seven IPOs and five M&A deals. The tech sector can be volatile, but if the tech bull market continues and IPOs perk up, it's probably only a matter of time until TWP's stock price gets a lift.
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Fool contributor Tom Taulli does not own shares mentioned in this article.
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