Silicon Valley and Wall Street are expected to intersect in a big way this week, with a Facebook IPO announcement rumored to be coming soon.
Facebook plans to file documents as early as Wednesday for a highly anticipated IPO that will value the world’s largest social network at between $75 billion and $100 billion, the Wall Street Journal cited unidentified sources as saying on Friday.
The world’s largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles.
That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc, which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said.
Investment banks usually earn fees of 4 percent to 5 percent on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8 percent from 2000 to 2012, on average, according to Thomson Reuters data.
In the case of Facebook — whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers — it’s unlikely advisors will be able to command the standard rate.
“These Valley types think this whole process could be automated and they don’t have to pay 7 percent to these flashy, French-cufflink-wearing Wall Street types,” said Eric Jackson, founder and managing member of Ironfire Capital, a technology-focused hedge fund, who has interacted professionally with executives at Facebook and other social-media companies.
A less measurable but equally important factor in obtaining the lead IPO position is whether bankers can connect with decision-makers at Facebook on a personal level.
“It’s really going to be the banker that understands and is sensitive to Zuckerberg and the executive team’s needs,” said Dun & Bradstreet’s Simmons. “Whoever does that successfully will get the bragging rights, the proverbial brass ring of tech IPOs.”
Facebook has had, and will have, no problem raising funds. Whoever takes the lead on this IPO, and the price they set, could shape future financial dealings for the social network, whose tentacles touch much of Silicon Valley.