September 18 in business history: a bond nobody would buy, a rescue agreed in a week, and $68 for the biggest IPO ever
Three September 18 prices — Jay Cooke's unsold railroad bonds in 1873, Lloyds TSB's GBP 12.2 billion takeover of HBOS in 2008, and Alibaba's record IPO in 2014 — show who ends up carrying what the price did not see.
Three prices left their makers' hands on the same September date, 141 years apart: a railroad bond a Philadelphia banking house had promised to place, a British bank bought from a rival in a single week, and the largest share sale in history. Each seller set a number, and each then found out who had agreed to carry what the number left out.
Jay Cooke & Company: the underwriter who became the owner
Jay Cooke & Company opened in Philadelphia in 1861 and sold more than $1.6 billion of Union government bonds during the Civil War, using the telegraph to confirm trades between its offices in Philadelphia, New York and Washington 12. In 1870 the Northern Pacific Railway, a second transcontinental line meant to run from Lake Superior to Puget Sound, made Cooke's firm its exclusive bond agent 1. The bet was that Cooke could sell railroad bonds to the same small investors who had bought war bonds from him.
Construction costs outran the money raised, and the next attempt to raise more failed 3. Railroad securities already carried the taint of the Crédit Mobilier scandal and a growing fear that too much track was being laid, and the European investors who had supplied much of the capital stopped buying after a crash in Vienna in May 1873 4.
On September 18, 1873, the firm suspended its operations and declared bankruptcy 5. Crowds gathered outside its shuttered office on Wall Street, where "the brokers stood perfectly thunderstruck," the New York Times reported the next morning 2. Two days later the New York Stock Exchange closed its doors for the first time in its history and stayed shut for ten days 3.
The losses landed on the people Cooke had sold to. Runs spread to banks in Washington, Pennsylvania, New York, Virginia and Georgia and across the Midwest, and at least 100 banks failed nationwide 6. By November, 55 of the country's railroads had failed and 60 more followed within the year, and the depression that set in lasted more than five years and bankrupted 18,000 businesses; railroad building fell from 7,500 miles of track in 1872 to 1,600 miles in 1875 7. Unemployment reached 14 percent nationally and 25 percent in New York City, and the Freedman's Savings Bank, which held the deposits of formerly enslaved Americans, was among the first institutions to fail, after Cooke's brother lent its capital to prop up the failing firm 2. Cooke invested in a Utah silver mine, rebuilt his fortune and died a rich man in 1905 2.
Decision mirror: Paper is worth what a buyer will pay for it, and the holder learns the difference at the worst moment. First Brands Group, an aftermarket car parts maker, filed for bankruptcy protection in September 2025 with liabilities above $10 billion and more than $8 billion of debt and inventory-backed financing; its loans plunged in value as lenders worked out how much of the borrowing sat outside the numbers they had priced 8.
Lloyds TSB and HBOS: £12.2 billion agreed in a week
The boards of Lloyds TSB and HBOS agreed the takeover on Wednesday, September 17, 2008, and announced it the following day with the support of the British government 910. HBOS shareholders were to receive 0.83 Lloyds TSB shares for each HBOS share, adjusted to 0.833 after a Lloyds share placing on September 19, which valued HBOS at 232p a share and £12.2 billion 910.
The market had spent the previous day valuing the same bank at little more than half that price. HBOS shares swung between 88p and 220p on September 17 and closed 19 percent lower at 147.10p, while Lloyds ended unchanged at 279.75p 9. HBOS was the country's largest mortgage lender, with a fifth of the market and 22 million customers, and the merged bank would hold close to a third of British savings and mortgages — a combination the competition watchdogs would normally have blocked and which ministers waved through under a national interest clause 9. HBOS's board had warned that depositors and lenders were pulling credit, and Prime Minister Gordon Brown told Lloyds chairman Sir Victor Blank that it would be helpful if Lloyds ended the uncertainty 9.
What the price could not see was the loan book. HBOS reported £681.4 billion of assets and £21.1 billion of shareholders' equity at June 30, 2008; £12.2 billion came to under 2 percent of those assets, and the losses building inside them had not been measured by the buyer 10.
Four weeks later the price came down. On October 13, 2008, the exchange ratio was cut to 0.605 Lloyds shares per HBOS share and the government put £5.5 billion of new capital into Lloyds and £11.5 billion into HBOS as part of a £17 billion package 10. HBOS's loss before tax for 2008 came to £10.8 billion, against a profit before tax of £5.5 billion in 2007 11. Shareholders bought 0.5 percent of the new Lloyds shares and 0.24 percent of HBOS's, which left the government holding 43.4 percent of the enlarged group 12. The two banks became one company in January 2009, renamed Lloyds Banking Group 13.
Decision mirror: A weekend price works out differently when someone else has counted the loss first. First Republic Bank, with $229.1 billion of assets and $103.9 billion of deposits, was closed on May 1, 2023, and sold the same day to JPMorgan Chase, which assumed all of its deposits and substantially all of its assets; the Federal Deposit Insurance Corporation put its own cost at about $13 billion and kept a share of the losses on the loans it sold 14.
Alibaba: $68 a share, and the answer the next morning
Alibaba Group priced its initial public offering at $68 an American Depositary Share on September 18, 2014, at the top of a range the company had already raised, selling 320.1 million shares to raise $21.8 billion at a market value of about $168 billion — more than eBay, Twitter and LinkedIn combined 15. Yahoo raised nearly $8.3 billion in the sale, and co-founder Jack Ma sold part of his stake for $867 million while keeping holdings worth more than $13.1 billion 15.
The order book had already told the company the price was low: it closed early on demand the underwriters could not fill, and one hedge fund with $3 billion in assets placed a multibillion-dollar order hoping to receive a fraction of it 15. Ma and his advisers had studied Facebook's 2012 flotation, where the shares slid after a botched opening and took a year to recover 1516. On the morning of September 19 the shares opened at $92.70 and closed at $93.89, up 38 percent, giving Alibaba a market value of $231 billion 17. Underwriters then exercised their over-allotment option for 48 million more shares, taking the deal to $25 billion and past Agricultural Bank of China's $22.1 billion listing of 2010, the largest initial public offering on record 17.
The offer price held for eleven months. The shares reached a record $119 that November, then fell below $68 for the first time on August 24, 2015, when they traded as low as $59 18.
Decision mirror: The trade a decade later went further. Figma priced its offering at $33 on July 31, 2025, a dollar above the top of a range it had already lifted, and its shares opened at $85, were halted after passing $112 and closed at $115.50 — a gain of 250 percent in a day and a market value near $68 billion, on an offering that raised $1.2 billion, most of it for existing shareholders 19.
The diligence test
Four questions for a price you are about to sign:
- What will you own if the buyers do not appear? Cooke's firm promised to place Northern Pacific bonds, kept the ones it could not sell, and shut its doors on September 18, 1873 with its customers' money inside them.
- What sits on the other side of the number that you cannot see from here? Lloyds agreed to pay £12.2 billion for a balance sheet of £681.4 billion inside a week, and re-cut the price four weeks later.
- Who has already measured the loss you are buying? The FDIC sized its own exposure at about $13 billion and kept a share of the loan losses before JPMorgan took First Republic's assets in May 2023.
- What is a low price buying you? Alibaba's sellers gave first-day buyers $26 a share for a clean debut; Figma's gave them $82.50.
References
- 1Wikipedia: Jay Cooke & Company
en.wikipedia.org
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- 4Harvard Business School, Baker Library: 1873 — Off the Rails
library.hbs.edu
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- 6U.S. Department of the Treasury: Financial Panic of 1873
home.treasury.gov
- 7Wikipedia: Panic of 1873
en.wikipedia.org
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- 9BBC News: Lloyds TSB seals £12bn HBOS deal
news.bbc.co.uk
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