Facebook, Wall Street: Friends with Benefits

With its long-awaited IPO filing, Facebook has revealed the identity of the partner that will define it for years to come

“Last year it letGoldman Sachs (GS) invest and funnel shares to private clients. In each case, Facebook’s ballooning valuation ($15 billion! $50 billion!), rather than the complicated entanglements with its backers, got headlines. Its practice of letting investors such as DST Managing Director Yuri Milner buy additional shares from employees and shareholders, in a so-called secondary transaction, even became standard practice at other hot Valley companies such as Twitter…

Shares in the IPO, which is likely to occur in May, will be divvied up among the best customers of Morgan Stanley (MS), JPMorgan Chase (JPM), Goldman Sachs, Bank of America (BAC), Barclays Capital (BCS), and Allen & Co., all of which have jockeyed fiercely for a place at the table and a commission on the proceeds. Facebook reportedly had to decide between Morgan Stanley and Goldman for the coveted position of lead underwriter, which is like having to choose between a leech and a tick for a medicinal bloodletting.

In a few months, bankers at those institutions will set the initial trading price and rig it to jump up nicely on the first day of trading—handing their clients a sweet, guaranteed return. Only then will Joe Investor (a designation that includes most of Facebook’s 845 million users) get a chance to buy a piece of the social network, which makes money by selling the ads to accompany users’ photos, status updates, and friend connections. “I’ve always interpreted their values to be about openness and transparency, and there is nothing less transparent than having five bankers set the price of your IPO,” says Zach Nelson, chief executive officer of enterprise software providerNetSuite (N), which ran a Dutch auction IPO in 2007.”

1 comment
  1. You’re so interesting! I don’t believe I’ve read something like that before. So nice to discover somebody with original thoughts on this topic. Seriously.. many thanks for starting this up. This website is one thing that is needed on the web, someone with a little originality!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: