The announcement of Facebook’s much-awaited initial public offering has taken the financial world by storm. Media reports suggest banking giants like Morgan Stanley and Goldman Sachs are keen to take the role as investment bankers.
Facebook, with its huge stock sale of about $10 billion, is expected to take place in early 2012 with one of the biggest IPO taking place over a decade.
According to Wall Street Journal, a decision on bankers “could be soon” as?the California-based company is planning to file offer documents in early 2012.
Both Morgan Stanley and Goldman Sachs are considered to be in the frontline for the leading role of investment-banking, which may fetch bankers somewhere up to $220 million in “bragging rights” for the IPO trophy and fee.
The fee for Facebook’s IPO stock is expected to be as big as $10 billion, valuing the social network at $100billion with average 2.2 per cent.
“That would mean a possible total payoff of as much as $220 million, though the company could negotiate lower fees because the Facebook deal is such a trophy,”?The Wall Street Journal?report said.
Well known insiders insist Facebook representatives have been holding meetings with several Wall Street firms since late November as ”they are ready and geared up for the IPO”
“Goldman and Morgan face stiff competition from rival investment banks vying for the prize of becoming the lead manager. Still, both are seen as having a leg up on competitors, even though each has possible knocks against them,” the report added.
While Morgan Stanley stands tall as a leading bank for Internet IPOs in the US and worldwide, Goldman also stays firm by orchestrating a $1.5 billion worth private offering of Facebook shares this January.
On the negative side, both financial giants have under performed during last year which can dent their Facebook IPO bidding credentials. According to the WSJ, Goldman Sachs had to restructure the January private offering to comply with US Securities laws while the Zynga IPO, managed by Morgan Stanley, under performed.
The report added that Chief Executive and Goldman Chairman Lloyd Blankfein?personally “went to woo” at least one Facebook board member earlier this fall.
A Bloomberg report suggests that the value of Internet flotation could reach $11 billion next year, which would only be second to the $18.5 billion raised at the height of a tech bubble in 1999.
?Technology is still a place where you can get out performance in terms of growth against a tepid market backdrop. You might see more IPOs emerge if we get resolution in Europe or stability that makes investors more comfortable with the overall market,??David Erickson of Barclays said while addressing the issue.
Compared to $252 billion last year, IPOs have raised over $155.8 billion in 2010, and US initial offerings generated $38.8 billion, about 10 per cent less than in 2010. In Asia, IPOs this year have raised $79.2 billion, less than half of $176.5 billion in 2010.
It will be interesting to see who will win the IPO battle, while Facebook users find it hard to decide if the social network’s estimated value is fair, too high, or too low.
(Written by Waqas Ahmed; Edited by Moign Khawaja)