As has been widely rumored and expected, Facebook today filed its Form S-1 registration statement with the U.S. Securities and Exchange Commission (SEC). The social networking giant is looking to raise $5 billion in its initial public offering (IPO), which is less than the $10 billion number thrown around before, but it can (and likely will) increase. It would appear Menlo Park wants to start with a conservative base and stir up demand for its stock by limiting supply. This will likely be one of the most watched technology IPOs in recent years, as it will be the largest ever to emerge from Silicon Valley.
Morgan Stanley has received the coveted lead left role. "Lead left" refers to where the top underwriter's name appears on the IPO prospectus. Also on the initial list of bookrunners on the deal are J.P. Morgan, Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital, and Allen & Company. While it appears that Facebook has hired six bookrunners, the list could still grow (but it's unlikely to shrink).
The company has been unusually guarded about the process for selecting banks involved in the underwriting syndicate, but Morgan Stanley's market leading position in Internet IPOs ultimately helped it secure the leading role. Morgan Stanley has led more U.S. and worldwide Internet IPOs than any other Wall Street firm in 2011, and has also been the leading participant in 2011 tech IPOs. Goldman Sachs, which was the other contender for the IPO, meanwhile led the league for global IPOs of all kinds last year, and it also ran the social networking giant's private offering, although its relationship with Facebook has reportedly been frayed.
The race to lead the management of Facebook's IPO has been a huge deal on Wall Street in the past year, since for investment banks it means tens of millions of dollars in fees, not to mention the bragging rights. Both Morgan Stanley and Goldman Sachs have been courting the social networking giant and its executives for months, if not longer. Even though Goldman Sachs lost, it will likely snag significant fees, as will all the companies involved. Morgan Stanley will of course earn the largest share. The amount in fees generated will depend on the company's ultimate valuation.
While the Morgan Stanley versus Goldman Sachs battle is over, there's still another one still continuing: Duncan Niederauer's New York Stock Exchange (NYSE) versus Robert Greifeld's Nasdaq. Both want to have the company's stock symbol, which is already finalized as FB, on their exchange. They have been campaigning aggressively for the listing during the past year, trying to sway Facebook CFO David Ebersman and other executives.
Now that the prospectus has been submitted, Facebook has entered its quiet period, which is the time put aside for the SEC to consider the IPO's validity. During this timeframe, also known as the waiting period, the federal securities laws limit what information a company and related parties can release to the public.
Once SEC staff approves the registration statement, Facebook will be able to start offering its shares to the public, possibly as soon as May. This timeframe is assuming a smooth registration process with the SEC and that questions from regulators won't get in the way.
Between now and then, analysts will be poring over Facebook's filing to see how the company plans to make money in the future, and what could possibly go wrong. The company is set to pass 1 billion users this year, but it's still working on the best way to make money from them.
While Facebook co-founder and CEO Mark Zuckerberg has frequently stated, both publicly and privately, that he is against the idea of rushing the company into an IPO, it appears he has finally agreed it is time. He's worried some workers will supposedly cash out in an IPO, and wants to keep them around for as long as possible, especially since staying private means focus: you don't have to worry about investor phone calls or show up at investor conferences. Still, Zuckerberg knows he needs to increase employee compensation. To stop employees from quitting the social networking giant in order to monetize their shares, the company needs to go public so employees can sell their stock on the open market at various times during the year and cash in on their holdings.
While Facebook certainly has boatloads of cash, extra money wouldn't hurt: as competition with Google heats up, some extra fire power might be needed. Google+ is here to stay, and Mountain View has much bigger pockets than Menlo Park does.
Now the waiting game begins: will Facebook manage to pull off one of the biggest U.S. public debuts ever?
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- Sean Parker: Facebook IPO 'the largest offering in history'