Is Facebook (FB) Taking Advantage of Underwriters?
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We're not underwriters, so we don't know the answer to this.
When does a bank just say "screw it, you guys take this one?" Initially, the best answer is probably "never," or "put down the whiskey." Sometimes you wonder, though.
According to reports out Tuesday, Facebook (Nasdaq: FB)(NYSE: FB) is tapping about 31 institutions for its IPO...31 institutions. Planning a $5 billion raise, its also said that Facebook will pay about 1.1 percent to underwriters, amounting to about $55 million.
Now, for 10 underwriters, $55 million is a stretch. But, having 31 is even worse. Everyone gets about $1.77 million. Of course, lead underwriters will be more and there will be stock opportunities.
Then, bragging rights are also diluted. Typically, a firm might boast about prices attained in the Google (Nasdaq: GOOG) IPO, and being one of a dozen that might carry some clout. With Facebook, Goldman might list the IPO on their credentials, as might Morgan Stanley, J.P. Morgan, William Blair, Deutsche Bank, Sterne Agee, Barclays, UBS, etc.
It's almost like you'd get more attention for not being in on the IPO, leading some to believe that a) you are already doing pretty well and decided against dedicating resources to the deal or b) you screwed up and caught the wrong bus to New York.
Underwriters were paid an average fee of 5.48 percent in 2011, according to data from Bloomberg.
Visit Facebook's IPO profile at StreetInsider.com's IPO Insider.
When does a bank just say "screw it, you guys take this one?" Initially, the best answer is probably "never," or "put down the whiskey." Sometimes you wonder, though.
According to reports out Tuesday, Facebook (Nasdaq: FB)(NYSE: FB) is tapping about 31 institutions for its IPO...31 institutions. Planning a $5 billion raise, its also said that Facebook will pay about 1.1 percent to underwriters, amounting to about $55 million.
Now, for 10 underwriters, $55 million is a stretch. But, having 31 is even worse. Everyone gets about $1.77 million. Of course, lead underwriters will be more and there will be stock opportunities.
Then, bragging rights are also diluted. Typically, a firm might boast about prices attained in the Google (Nasdaq: GOOG) IPO, and being one of a dozen that might carry some clout. With Facebook, Goldman might list the IPO on their credentials, as might Morgan Stanley, J.P. Morgan, William Blair, Deutsche Bank, Sterne Agee, Barclays, UBS, etc.
It's almost like you'd get more attention for not being in on the IPO, leading some to believe that a) you are already doing pretty well and decided against dedicating resources to the deal or b) you screwed up and caught the wrong bus to New York.
Underwriters were paid an average fee of 5.48 percent in 2011, according to data from Bloomberg.
Visit Facebook's IPO profile at StreetInsider.com's IPO Insider.
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