Facebook, the company that owns the largest social network in the world, chose Morgan Stanley to lead the initial public offering (IPO) for listing on the stock exchange, according to sources cited by Bloomberg. With an estimated $5 to $10 billion, Facebook will be offering the largest ever conducted by an internet company, exceeding that of Google in 2004, which amounted to $1.67 billion. Facebook is to submit documentation prior to listing, which will bring to light more details on its activities and strategy.
All the big banks on Wall Street fought to obtain the warrant, which will bring an extra addition to commissions and market recognition. Analysts estimate that Facebook will generate commissions worth about 500 million dollars to banks that will participate, depending on the final evaluation of the company. Morgan Stanley as lead manager, will earn the most, but the group includes most big names on Wall Street (Goldman Sachs, JP Morgan, Bank of America and Barclays), which will also draw their share from the listing year.
Morgan Stanley, the leader in Internet listings
Getting the Facebook mandate is a great victory for Morgan Stanley and Michael Grimes, head of investment banking for the IT sector after last year it won the largest share of IPOs run by internet companies (20%) and brokered listings of known companies as Zynga (maker of games for Facebook), Groupon (the company that sells discount coupons) and LinkedIn. An advantage for Morgan Stanley is the relationships that Grimes has in Silicon Valley. Grimes graduated from the University of California (Berkeley) and has close links with investors looking for promising start-ups, and with Sheryl Sandberg, Chief Operations Officer (COO) of Facebook, who was in Google management at the time of listing. Morgan Stanley led the Google listing.
Defeat for Goldman Sachs
For Goldman Sachs, the largest U.S. investment bank, loss of consortium leader mandate for Facebook listing is a defeat. Goldman Sachs has invested since 2010 in Facebook with the Russians from Digital Sky Technologies, and in January 2011 it arranged a highly controversial private placement when Facebook has raised about 1.5 billion dollars, but that was not accessible to investors in the U.S. This placement, which caused negative reactions in the U.S. market at that time, cooled relations between Facebook and Goldman Sachs.
