Media reports were out last evening confirming Morgan Stanley (MS) as the lead underwriter and manager for Facebook’s much-anticipated IPO, which is expected to be announced officially and filed with regulators as early as today. The news is important as it may give tech shares a new catalyst, especially after AMZN disappointed in its earnings report after the close yesterday. It is anticipated that this will be the largest internet or tech IPO ever, beating the debut of Infineon (IFX) in 2000.
Facebook is expected to trade as symbol FB, although the listing exchange is still unannounced and hotly contested between the NYSE and Nasdaq. According to Bloomberg, “the NYSE and Nasdaq are trying to lure Facebook by promising they will do the most to raise its profile, coming down to who’s willing to put the most promotional money out and offer the most in terms of listing services.”
The reports have the initial offering as targeting a capital raise of $5 billion, although this could easily drift higher as demand and pricing is set. Earlier reports had a capital raise anticipated at $10 billion, but several recent social media/internet IPO’s have limited the initial float of shares which has worked in obtaining an initial Day One pop in share prices. But this has not necessarily resulted in favorable share prices over the long haul as many of the ‘hot” internet IPO’s are now trading below offering prices. Facebook, however, is an entirely different story and we will have to watch to see how the offering plays out over time.
Morgan Stanley’s win is a real blow to Goldman Sachs as GS was considered the lead candidate last year and the business was “it’s to lose” after raising some initial capital funding for Facebook. However, Goldman had a major misstep in offering pre-IPO shares to U.S. clients in a transaction which had to be aborted due to SEC concerns, disappointing both clients and Facebook management. Morgan Stanley was far from a dark horse candidate, however, as MS has been the clear leader in recent years in Silicon Valley deals and IPO’s. It also has the clear advantage with its retail brokerage, Smith Barney, owned in partnership with Citigroup. Having 17,000 “wealth advisors” and large client base is a huge consideration for a deal of this magnitude and likely future Facebook share offerings. MS also had the lead for Google’s IPO, another large advantage, especially since COO Sheryl Sandberg came from GOOG. Goldman, JPMorgan Chase, Barclay’s and Bank of America are reported to be also managing the Facebook offering.
Good Trading!
David W. (aka The Underground Trader)
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