RENÉ PARMANTIER

Banking's 'Mr. Shorty' Under Fire

oddo_reuters
Oddo Seydler Bank is based in Frankfurt but is owned by French parent Oddo & Cie.
  • Why it matters

    Why it matters

    A merger with BHF Bank could give Oddo Seydler Bank, and its boss René Parmantier, a more dominant position among financial service providers catering to small- and medium-sized companies.

  • Facts

    Facts

    • Oddo Seydler Bank is the market leader in investment banking involving SMEs in Germany.
    • Its parent company Oddo & Cie is rumored to be considering merging it with France’s BHF Bank.
    • The Frankfurt-based bank hassuffered damage to its reputation following the failure of large IPO client Steilmann, a fashion retailer.
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    Audio

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Frankfurt investment banker René Parmantier has plenty of fans among Germany’s Mittelstand, the small- and mid-sized enterprises that make up the backbone of the country’s economy.

As the head of Oddo Seydler Bank, the market leader in investment banking involving SMEs in Germany, these companies consider the 40-year-old to be a man of his word.

Andreas Granderath of software company P & I said Mr. Parmantier can be trusted to stick to an agreement even when it’s not on paper. Martin Billhardt, the former head of PNE Wind, called him a “very reliable bank manager.”

Another well-known entrepreneur told Wirtschaftswoche, Handelsblatt’s sister publication, that Mr. Parmantier was a lifeline: “When we were in crisis mode, only one banker stuck with us.”

Oddo Seydler has played that role for a number of market-listed Mittelstand companies. “We are too small for the large banks,” the chief financial officer of one such company said.

Mr. Parmantier has helped businesses raise millions of euros – but it was the collapse of one of those firms that tarnished his reputation among investors. When the fashion chain Steilmann went public in November 2015, Oddo Seydler was in charge. “We don’t bring any business that’s not profitable onto the market,” Mr. Parmantier told the Börsen-Zeitung newspaper at the time.

Mr. Parmantier has helped businesses raise millions of euros – but it was the collapse of one of those firms that tarnished his reputation among investors.

In late March, less than five months later, Steilmann was insolvent. Mr. Parmantier’s team had made a big push to bring investors on board. In 2015 alone, the bank issued three bonds for the company, put a new loan on the market and twice topped up another – raising at least €74 million ($84.8 million) for Steilmann in all.

In the end, though, Steilmann was too deeply in debt to stay afloat. It’s possible that Mr. Parmantier was warned of the company’s problems. The bankers at Oddo Seydler had a hard time getting investors to sign up, ultimately securing less than a tenth of the millions of euros they had planned to raise.

A look at Steilmann’s books offers a clue as to why, with a number of key performance indicators in the red even before the chain went public. The bank defended itself, saying Steilmann had been poised to turn a fourth-quarter profit until textile sales collapsed – a development it says it couldn’t possibly have predicted.

Steilmann’s collapse could spell trouble for Mr. Parmantier, who is already seeing investors turn away from the bank. One major investor who had long stood by the Frankfurt financial house put it this way: “Regardless of how good the security looks, we’ll no longer be buying anything from Oddo Seydler.”

Meanwhile, the bank appears poised to become even more influential. The owner of its French parent company Oddo & Cie, Philippe Oddo, recently bought up BHF Bank. Sources close to BHF said there are no plans for a merger in the short-term. But as one insider told Wirtschaftswoche: “It makes no sense to keep two separate banks whose businesses partially overlap.”

The source speculated that Oddo & Cie could make BHF into solely a private banking arm, and BHF’s capital market services could be left to Oddo Seydler. Asked to comment, Mr. Oddo said he and his staff would be developing new ideas.

Mr. Parmantier built up the bank’s business in designated sponsoring, which sees it trade shares on behalf of smaller companies. Oddo Seydler also purchases shares from sellers if another buyer can’t be found.

“Big banks were only peripherally involved in managing share prices; they just quoted prices that no one could negotiate,” said Gerold Lehmann, a former member of Oddo Seydler’s supervisory board. Mr. Parmantier’s approach helps him win clients who lead to more business later on, Mr. Lehmann said.

Today Oddo Seydler is the market leader in sponsoring, managing the stocks of some 200 Mittelstand companies, including Beate Uhse, Bastei Lübbe and Borussia Dortmund. And unlike some of its competitors, the bank has stayed in the black. Mr. Lehmann said Mr. Parmantier’s critics in the financial world are simply jealous. “His success speaks for itself,” he said.

In Frankfurt, there are no shortage of stories about the banking chief, who has a reputation for being difficult. He reportedly fired an employee on the spot for leaving a Christmas party at 11 p.m., calling the early exit “disrespectful behavior.” When the staffer tried to collect his things later on, he was un-fired.

Mr. Parmantier doesn’t dispute that encounter. He is known as someone who doesn’t react well when key employees quit or prized clients decide to take their business elsewhere.

“When we terminated the arrangement,” said one of the bank’s former sponsoring clients, “I had to listen to Parmantier berate me about what we were possibly thinking to simply end the contract.” Asked to comment, Oddo Seydler said it is not the bank’s practice to yell at clients.

Another former customer, the head of Euro Asia Premier Real Estate, Patrick Chan, described Mr. Parmantier as an “irresponsible cowboy.” Mr. Chan said the banking boss agreed to back the placement of a convertible bond for his business. He said Mr. Parmantier failed to follow through on the project, however, accusing him of pocketing €90,000.

“I can accept if someone doesn’t want to work with us,” Mr. Chan said, adding that it was outrageous to take someone’s money without rendering any services. Ultimately, Euro Asia was only refunded €60,000 of its three-month retainer, a payment the bank described as standard.

parmantier_oddoseydler
Company bosses are mixed in their feelings towards René Parmantier. Source: Oddo Seydler Bank

 

Oddo Seydler had agreed to get the company’s securities in order but claimed that it was unable to do so. The bank alleged that Euro Asia had failed to meet certain conditions – firstly, that the company had not been listed on a regulated market and secondly, that it had not fulfilled its contractual obligations.

The bank said the unrefunded portions of the company’s retainer were used to pay for legal counsel, as well as for a bank employee’s trip to visit properties in China, many of which Oddo Seydler said were vacant.

Among longstanding employees, Mr. Parmantier is known for pushing staff to be more aggressive in selling securities. Oddo Seydler took issue with that characterization, describing the approach as “engaged,” not “aggressive.”

Both current and former staff claimed that Mr. Parmantier would castigate employees whom he saw as poor performers, and said there was tremendous pressure to sell. The bank admitted that Mr. Parmantier always held all employees in all divisions to the highest standard, as its clients expect superior service, but said a person’s perception of pressure is “highly subjective.”

But one former client’s experience with Oddo Seydler seemed to support its staff’s accounts. The client said one of the bank’s salesmen tried to force him into agreeing to raise capital, despite the fact that his company didn’t need the money.

Oddo Seydler said it could not recall such a case, but also disputed the term “force,” calling it “inappropriate.” The bank also said that a capital increase could be a good option for a company, even if it is not in “acute need of financing” to optimize its financing structure.

Investors who have put their money on Oddo Seydler’s business, meanwhile, have been watching the holes in their portfolios grow bigger of late. Some of the bonds that Oddo Seydler has issued, either alone or with other banks, are in default, including those of solar energy supplier 3W Power, fashion house Strenesse and soup-maker Zamek.

Nine of Oddo Seydler’s bonds have lost investors about half a billion euros. At the time Zamek’s bond was issued, Mr. Parmantier made the following statement: “As an underwriting bank, we consider it our responsibility to bring only high-quality bonds to the market.”

Now, the state prosecutor’s office in Düsseldorf is investigating Zamek’s former management on suspicion of bond fraud, an allegation the company’s ex-bosses have rejected as baseless. Oddo Seydler is a witness in the legal proceedings.

The bank has also run into trouble with regulators and state prosecutors with instances of circular trading. Multiple traders with Oddo Seydler were involved in having shares bought and sold back and forth between the trading floor and the electronic trading system Xetra. In some cases, more shares were traded in two minutes than are normally traded in an entire day.

Circular trading can create artificial liquidity; it can also distort the SDax or MDax stock indices, since inclusion in such an index is based on revenue from a share’s sale. In 2013, state prosecutors in Frankfurt launched a probe into artificial revenue generated by shares of the IT company vwd. Authorities fined the bank instead of taking the case to trial.

Last year, the sanctions committee of Frankfurt’s stock exchange ordered Oddo Seydler to pay it €20,000, after it found that five of the bank’s traders had engaged in circular trading. The bank claimed it had traded in good faith on the basis of a legal opinion, and said the German stock exchange had changed its interpretation of the rules.

State prosecutors in Frankfurt are also investigating another case involving Oddo Seydler. An employee with the company Xing was accused of getting one of the bank’s employees to manipulate Xing’s share price. The investigation against the Xing employee, who had to pay money to a nonprofit, was dropped, but the probe of the Oddo Seydler employee is ongoing.

One of Oddo Seydler’s former clients accused the bank of more serious violations. YOC, a Berlin-based company that sells mobile advertising, hired the bank to raise capital. But the share price took a plunge before its new stocks were issued, meaning YOC had to sell them at lower prices and ultimately raised less money than expected.

The company blamed the bank for the fall in the share price, accusing it of short-selling and of telling at least one investor to sell YOC shares. Short-selling happens when traders sell borrowed shares to get commissions and encourage liquidity, or to buy them back later for less money. The practice hurts a company that is trying to raise capital because it has to issue new stocks when its share price is lower.

YOC brought a suit against Oddo Seydler for the alleged short-selling, an action that earned Mr. Parmantier the nickname “Mr. Shorty” in some Frankfurt financial circles. According to the court, the company accused the bank of using confidential information to generate additional earnings.

The bank disputed YOC’s account, denying that it had engaged in short-selling. Oddo Seydler blamed the fall in the company’s share price on research reports it said were published at the time. The bank also said it had found no indication that one of its employees had advised a YOC shareholder to sell, but said staff have a right to their own opinions and to advise their clients accordingly.

The court in Frankfurt had scheduled proceedings for January 14, but they were cancelled after Oddo Seydler settled with YOC for €750,000. The bank said the arrangement was not an admission of guilt and that it only settled to finalize its acquisition by Oddo & Cie.

Mr. Parmantier’s previous work has raised other questions. He once served as president of the governing board of Ffm Mittelstand AG, a Swiss firm. A former colleague said the company had planned to launch a hedge fund on Malta that would bet against the hidden champions of Germany’s Mittelstand, based on fluctuations in share prices.

That fund never really got off the ground, and Ffm has ceased operations. The bank confirmed that the project was canceled “without ever having attracted external funding.”

Mr. Parmantier’s involvement in the planned fund has fueled speculation about a possible conflict of interest – that the head of an investment bank serving Mittelstand companies would also have been in charge of a hedge fund that bets on Mittelstand companies whose shares are losing value – potentially even on his own clients.

Despite all the questions surrounding his leadership, Mr. Parmantier still has the support of his bank’s parent company. Mr. Oddo, the head of Oddo & Cie, credited Mr. Parmantier with facilitating his purchase of Oddo Seydler.

“I trust him,” Mr. Oddo said.

 

This article first appeared in the business magazine WirtschaftsWoche. To contact the authors: annina.reimann@wiwo.de, melanie.bergermann@wiwo.de

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