Morgan Stanley was named lead underwriter for Facebook”™s initial public offering at the expense of rivals Goldman Sachs and Merrill Lynch, further boosting the firm”™s reputation as the industry”™s current leader in Internet IPOs, analysts said.
Facebook Inc.”™s IPO filing date and likely $5 billion-plus offering may have been Wall Street”™s worst-kept secrets, but until the Feb. 1 announcement, investors were waiting to see which big-name bank would be named as the offering”™s lead underwriter.
After the selection of Morgan Stanley was confirmed in documents filed with the Securities and Exchange Commission, analysts questioned whether Morgan Stanley has solidified itself as the new leader in underwriting Internet IPOs.
Goldman Sachs Group Inc. and Credit Suisse Group AG currently occupy the top two spots in the all-time global Internet IPO advisor rankings compiled by Thompson Reuters, but Morgan Stanley ranks a close third.
Morgan Stanley served as lead underwriter for initial public offerings by Internet start-ups LinkedIn, Groupon Inc. and Zynga Inc. last year, in addition to taking the lead on Google Inc.”™s 2004 offering.
“I think from the perspective of establishing and re-establishing oneself as the leader in an IPO market in a particular industry segment, having your name associated with the marquee offerings on a recurring basis certainly is a desirable place to be,” said Brian Eccleston, partner in the capital markets practice at BDO USA L.L.P., a global financial advisory and consulting firm with offices in New York City.
Underwriter fees for the Facebook offering have not been disclosed yet but are reported to be lower than the usual 5 percent commission due to the expected size of the valuation. Commissions could be as little as 1 or 1.5 percent.
However, as lead underwriter, Morgan Stanley stands to receive the majority of the payout.
For 2011, Morgan Stanley reported underwriting revenues of $2.5 billion, including equity underwriting revenues of $1.1 billion.
Currently, five other financial firms are listed among the offering”™s underwriters. They are JPMorgan, Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital and Allen and Co. L.L.C.
While more banks may be added and the pecking order may be reshuffled as they battle for larger shares of the underwriting fees, the top spot is highly unlikely to change, giving Morgan Stanley the largest share of the banks”™ commission.
“This is an extremely high-profile IPO and I suspect any one of them (the banks) would have a great interest in being the lead,” Eccleston said. He said it is unusual for so many high-profile banks to be involved in an IPO, but added, “I don”™t think there”™s anything typical about Facebook.” Headquartered in New York City, Morgan Stanley is a major Westchester County employer, reportedly employing 1,475 workers at its 2000 Westchester Ave. office in Purchase.
