Magazine article American Banker

Wells Seen Posting $500M of Venture Gains for 1Q

Magazine article American Banker

Wells Seen Posting $500M of Venture Gains for 1Q

Article excerpt

In a sign that the private equity bounty enjoyed by several banks has not reached an end, Wells Fargo & Co. is expected to report that it reaped about $500 million this quarter from its direct investing business, primarily through its Palo Alto, Calif., venture capital unit, Norwest Ventures Partners.

The gain, revealed in discussions with Wall Street analysts last week, is smaller than the $721 million Wells made on its private equity investments in the fourth quarter. But it is still a considerable sum, one that will allow Wells to offset losses absorbed from a securities portfolio repositioning to deal with higher interest rates, analysts said.

A substantial portion of Wells' latest gain appears to stem from a well-placed investment in a technology company, Siara Systems, that never actually even got to launch an initial public offering.

In December 1998, Norwest Venture Partners, which focuses on emerging growth technology companies, invested $5.5 million in Siara, a Mountain View, Calif., firm that makes equipment for global service providers. In November the rival equipment maker Redback Networks, based in neighboring Sunnyvale, announced it would merge with Siara in a stock deal valued at $4.3 billion.

By March 8, when that merger - really an acquisition by Redback, an older and already publicly traded company - closed, Norwest Venture Partners was sitting on 3.5 million shares of Redback, currently worth nearly $300 each.

Wells will be able to use this and other venture gains when it rejiggers its securities portfolio for the quarter. …

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