Facebook Orders Banks To Stop Leaking IPO Details 110
redletterdave writes "In the weeks leading up to Facebook's massive $100 billion initial public offering, Mark Zuckerberg reportedly told JPMorgan Chase, Morgan Stanley, Goldman Sachs and the other banks involved in the IPO to stop leaking information to the media. Zuckerberg was reportedly unhappy that the banks leaked details about his company's Wall Street debut, including the Feb. 1 date it chose to file its S-1 paperwork with the SEC. Facebook execs are also miffed about the subtle rivalry between Morgan Stanley and Goldman Sachs, which were jockeying to become the lead underwriter for the IPO, the largest since Google's $1.7 billion offering in 2004. The banks are heeding Zuckerberg's warning, urging their employees to keep quiet about Facebook's filing, because disobeying Zuckerberg's wishes could mean getting dropped from one of the most lucrative IPOs in recent memory. The banks stand to make $40 million from their deals with Facebook."
Re:Except it's not $100B. (Score:5, Informative)
$5B is the amount FB will pocket with the sale of shares at the IPO price. The $100B number is the market value of all share @ the ipo price, give or take. I have heard as low as $75B.
Re:SEC filings public documents? (Score:3, Informative)
Yes, they are. What seems to be the issue is that everyone in the blogosphere knew about the filing the day before it was filed.
Re:Except it's not $100B. (Score:4, Informative)
Right. The public offering is $5B in shares. The market cap of the preexisting shares is not a part of the public offering. It's often the number bandied about during an IPO, but it is not the actual size of the IPO.
Re:banks make only $40 million? (Score:4, Informative)
Still sounds crazy low. Banking fees for IPO deals are generally 7% for "normal" sized deals (a few hundred million), and around 3% for large deals. You'd expect the fees for a $5B IPO to be around $150M. If they are doing it for less, it's because the value of the prestige and marketing value they get from this deal is worth a fortune to them.
Re:SEC filings public documents? (Score:5, Informative)
1) SEC does not like clients advertising/talking to media etc. in the quiet period prior to IPO. If everyone knew when the documents were being filed, SEC could then treat that period too as a quiet period and would hinder facebook's advertising. It can also block any private capital raising that facebook is doing.
2)It affects prices of related stocks. Look at how linkedin, zynga stocks jumped the day after facebooks filings. It would have been easy to buy those stocks the day before filing and sell it the day after for a significant profit. It is true that linkedin/zynga stocks should not move on facebook news, but certainly their volatility increases when facebooks revenue metrics are released. So anyone buying options on these related stocks the day before profited
3) If at the last minute facebook wanted to change their bookmakers ( non-lead bookmakers can be changed easily enough), it would be difficult after the news leaks.