Facebook chooses Morgan Stanley to lead IPO

Posted by RJ & Makay on February 1, 2012

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Facebook chooses Morgan Stanley to lead IPO

Facebook Inc. has chosen Morgan Stanley to lead its planned initial public offering (IPO).  The social networking giant filed with the Securities and Exchange Commission (SEC) today to raise at least $5 billion through the IPO, and plans to begin to sell stock this spring under the ticket symbol FB. It would be one of the biggest debuts in market history and will provide investors with a view of Facebook’s operations, business performance and executive pay.

Analysts expect the company, which has 800 million members worldwide, to go public at a $75 billion to $100 billion valuation.  As the IPO leader, Morgan Stanley is in position to garner a larger share of the fees received by securities firms for coordinating the deal.

“This means a huge windfall for them,”  said Jack Albin, chief investment officer at Harris Private Bank.  “The fact that they have led so many high-profile social media deals in the last year is proof positive that Morgan Stanley is most likely to be able to get this deal done.”  Bloomberg data shows that the firm won the biggest share of underwriting business for U.S. Internet company IPOs last year.

Other firms participating in the IPO include Goldman Sachs Group Inc., JPMorgan Chase & Co., Barclays Plc, and Bank of America Corp., inside sources said.

The investment banks could generate as much as $500 million in fees contingent on Facebook’s ultimate valuation.

Analysts believe that the firm generates most of its revenue from online advertising, though it also gets a cut of site-executed transactions such as the purchase of games.  Percentages of revenue from advertising, transactions and other possible sources will give the public a clearer view of its financials.

Leaked documents in 2009 showed revenue of $1.24 billion for the nine-month period ending in September 2009, which was up 180% from the prior year’s period.

Early investors in the company include Clarium Capital’s Peter Thiel, and venture capital firms Accel Partners, Greylock Partners, and Meritech Capital.  Microsoft was also a big early investor with an injection of $240 million in 2007.

“There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future,”  said Facebook CEO Mark Zuckerberg in a letter accompanying the filing.  “The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.”

“It [the IPO] is both a recognition of what has been accomplished, and it points to the fact that Mark Zuckerberg has done a remarkable thing in building a global institution in a very short time,”  said Lawrence Summers, who was president of Harvard when Zuckerberg started Facebook there.

RJ & Makay




Facebook picks Morgan Stanley to lead IPO (http://www.bloomberg.com/news/2012-01-31/facebook-said-to-hire-morgan-stanley-to-lead-social-networking-site-s-ipo.html).  Bloomberg, February 1, 2012

Facebook IPO: What to keep an eye out for (http://blogs.wsj.com/deals/2012/02/01/facebook-ipo-what-to-keep-an-eye-out-for/).  WSJ, February 1, 2012

Facebook IPO: $5 billion filing to sell stock in May (http://abcnews.go.com/Technology/facebook-ipo-billion-filing-sec-sell-stock/story?id=15483472#.Tym-FiMqjWI).  ABC News, February 1, 2012

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