Goldman’s Noto Nabs Twitter IPO Lead in Return From NFL

Three years after returning to investment banking from the National Football League, Anthony Noto is tackling his biggest project yet: Twitter Inc.’s initial public offering.

Noto, a dot-com era Internet analyst, is Goldman Sachs Group Inc.’s head banker on Twitter. The IPO would be the largest for a U.S. technology company led by Goldman, according to data compiled by Bloomberg. The microblogging service publicly released its IPO filing yesterday via the U.S. Securities and Exchange Commission, using a $1 billion placeholder amount.

Twitter is helping Goldman Sachs bounce back after the investment bank was trounced by Morgan Stanley for the prime spot on social-media deals from LinkedIn Corp. to Facebook Inc. Noto, who co-manages technology investment banking with George Lee, has helped drive new deals for New York-based Goldman Sachs since returning to his former employer from the NFL, where he was chief financial officer.

“The franchise was floundering for a bit in the tech IPO market,” said Lise Buyer, a former Internet analyst who now runs Class V Group LLC, an IPO consultancy in Portola Valley, California. Now Goldman Sachs is “clearly giving Morgan a run for their money,” she said.

David Wells, a spokesman for Goldman Sachs, declined to comment or make Noto available for an interview. Mary Claire Delaney, a spokeswoman for Morgan Stanley, and Jim Prosser, a spokesman for San Francisco-based Twitter, declined to comment.

Football Star

Noto, 45, honed his competitive skills as a star football player in college at the U.S. Military Academy at West Point, leading the team in tackles in 1990. He’s going up against Michael Grimes, Morgan Stanley’s head of technology banking and one of the architects of the Facebook IPO. Noto trained to be a member of the Army Rangers and spent time in the Middle East while serving as a signal officer in the Army’s infantry.

Upon returning to Goldman Sachs in 2010, he joined a group of veteran technology bankers, including David Ludwig and Nick Giovanni.

On Sept. 13, a day after Twitter said that it had confidentially filed for an IPO, Noto -- one of the few investment bankers who tweet regularly -- sent the following posting to his few hundred followers: “Now @ArmyFootball beating @StanfordFootball on Saturday would be a perfect ending to the week.” (Stanford University won.)

As the NFL’s CFO, a job he held from 2008 to 2010, Noto helped team owners take on the 1,800-member players union, setting the stage for a lockout in 2011.

Yelp Win

His first marquee win after rejoining Goldman Sachs, where he worked as an analyst from 1999 until 2008, was the IPO for Yelp Inc. Noto told Yelp executives in the pitch meeting that Goldman Sachs was playing catch-up to Morgan Stanley and that he was committed to landing the deal, according to Jeremy Stoppelman, the business-review site’s chief executive officer.

“He was stepping up, acknowledging that they were underdogs but they were going to work harder than everyone else,” Stoppelman said in an interview. “We felt like we were just going to get incredible dedication from him because we knew he wanted to win.”

As significant as the Yelp deal was, Twitter is the real trophy. Twitter didn’t directly address its valuation in the filing yesterday, though it said it determined the fair value of its common stock as of Aug. 5 was $20.62 a share. Twitter has 620 million shares outstanding, according to people with knowledge of the matter, implying a valuation of $12.8 billion, more than double Yelp’s market capitalization.

Facebook Hangover

If Twitter were to raise the amount used in its placeholder in the filing, that would be more than twice the size of Goldman Sachs’s biggest IPO of a U.S. technology company. That took place 17 years ago, when CompuServe Inc. raised $480 million. Yelp raised about $123 million in March 2012.

While Noto outflanked Morgan Stanley and other banks to win the Twitter deal, the bigger test will be selling the IPO to public-market investors still reeling from Facebook’s offering last year. Facebook raised $16 billion and maximized the deal by selling shares at $38 apiece, only to see the stock lose half its value over the next few months. The shares didn’t bounce back to close above the IPO price until August 2013.

Twitter is likely to leave money on the table so the stock pops, said people with knowledge of the company’s plans.

Different Strategy

“Twitter is making it clear it wants to do things differently than Facebook,” said Harry Weller, a general partner at venture-firm New Enterprise Associates who worked with Noto on the IPOs of Groupon Inc. and Cvent Inc. Companies want “investors to make money, and pricing for perfection is usually a mistake,” he said.

Noto is based in New York, 3,000 miles (4,800 km) from San Francisco and his counterpart Lee, a 19-year veteran of the firm. Lee worked on the Facebook deal.

Spencer Rascoff, CEO of real-estate website Zillow Inc., worked with Noto at Goldman Sachs in the late 1990s, and now counts on him as an adviser. Led by Noto, Goldman Sachs was a joint bookrunner on Zillow’s follow-on stock offerings in 2012 and 2013. Noto’s operational experience and understanding of how to run a business separate him from the pack, Rascoff said.

“People don’t think of him as a deals guy anymore,” Rascoff said. “They think of him like he’s one of us.”

Goldman Sachs has jumped to the top of the U.S. technology media and Internet IPO rankings this year, with Morgan Stanley second, according to data compiled by Bloomberg. Last year Goldman Sachs was fifth. Morgan Stanley and JPMorgan Chase & Co. are listed as co-managers on Twitter IPO, yesterday’s filing shows.

Bankers’ Fees

Underwriters are poised to pocket up to $30 million in fees, according to researcher Freeman & Co. Twitter may pay around 1 percent to 3 percent, a slightly higher percentage than Facebook’s because of its smaller deal size. Facebook paid 1.1 percent for its IPO last year and Zynga Inc. paid 3.25 percent for its IPO in 2011.

While part of Goldman Sachs’s comeback is the result of Morgan Stanley’s troubled Facebook offering as well as the stock drops that followed Zynga and Groupon’s IPOs, Noto deserves his fair share of credit, said Ned Segal, who ran software investment banking at Goldman Sachs until February.

Noto has developed good relationships with companies by working hard on deals even if Goldman Sachs doesn’t win the vaunted lead left position on the prospectus, Segal said.

“Anthony’s approach has always been to give everything to a deal whether he was on the left or in a more subordinated role,” said Segal, who is now CFO at RPX Corp. in San Francisco.

Noto’s History

In addition to helping reboot Goldman Sachs’s technology practice, Noto has some burnishing of his own reputation at stake. After all, he was the firm’s Web analyst during the Internet crash, meaning most of the companies he covered ended in .com.

Noto joined Goldman Sachs in 1999 after graduating with a degree in business administration from the University of Pennsylvania’s Wharton School.

Though he was highly ranked by Institutional Investor Magazine, that carried little weight when stocks that he recommended buying, such as, and Webvan Group, cratered in the bust.

He wasn’t alone. Henry Blodget, then at Merrill Lynch & Co., maintained similarly lofty ratings on Web companies as did former Morgan Stanley analyst Mary Meeker. Still, CNBC reporter David Faber called him “Anthony No Dough, Anthony Don’t Know” for hyping such names.

In the years after the bust, those misfires were no longer held against him as he made prescient calls on Internet and media companies. His analyst experience is now helping him bridge the gap between technology entrepreneurs and money managers.

“There’s no pretense about him, which is unusual for a banker,” said NEA’s Weller. “He can quickly assess a model and knows how to speak the language of a buyer.”

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