Facebook Inc. (FB) bankers led by Morgan Stanley (MS) may split about $176 million for managing the social-networking company’s initial public offering after accepting a lower-than-average fee for their work.
The underwriters are collecting about 1.1 percent of the $16 billion Facebook raised in its IPO yesterday, said two people with knowledge of the matter, who declined to be identified because the rate hasn’t been disclosed. The company hired 33 investment banks for the offering, with Morgan Stanley, JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) leading the sale.
Facebook, now valued at $104.2 billion, is paying less than one-third the 3.6 percent median fee on the 10 largest U.S. offerings in history before this one, according to data compiled by Bloomberg. With larger IPOs, banks are often willing to take a smaller percentage fee and can use high-profile offerings to help land more IPO mandates later on.
“This is just a once-in-10-years event, so they figure they’ve got to be attached to it, and they’re going to glow in the association with being a part of it,” said Eric Jackson, founder of investment firm Ironfire Capital LLC in Naples, Florida. “They’re going to get higher fees and more business in the future because of it.”
Morgan Stanley Bankers
The biggest share of IPO fees typically goes to the lead underwriter on the deal. Dan Simkowitz, Morgan Stanley’s chairman of global capital markets, was one of the main bankers on the offering, said a person familiar with the matter. He also helped run General Motors Co. (GM)’s 2010 IPO that raised $18.1 billion.
Michael Grimes, global co-head of technology investment banking at Morgan Stanley, also played a key role. He introduced Facebook executives to investors at a lunch meeting last week in Palo Alto, California, part of a road show to pitch the deal to prospective buyers. Grimes became acquainted with Facebook Chief Operating Officer Sheryl Sandberg when he handled the IPO for Google Inc. (GOOG), her former employer. He meets regularly with investors in search of the next promising startup and is an avid consumer of his clients’ products.
Sandberg recused herself from picking bankers for Facebook’s IPO because she had relationships with several banks from her previous job at Google, one person said.
Facebook Chief Financial Officer David Ebersman was the point person on the deal, starting with the selection of the lead bankers, one person said. Sandberg and Chief Executive Officer Mark Zuckerberg were involved in major decisions throughout the process, the person said.
A spokesman for Menlo Park, California-based Facebook declined to comment.
At JPMorgan, Vice Chairman Jimmy Lee, technology bankers Jennifer Nason and Noah Wintroub, and equity capital markets bankers Liz Myers and Michael Millman worked on the offering, said one person.
The Goldman Sachs team working on the deal included technology bankers George Lee and Scott Stanford, and equity capital markets bankers David Ludwig and Andy Fisher, another person said.
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