Morgan Stanley (NYSE:MS) will lead the much awaited initial public offering (IPO) of the world’s biggest social networking site Facebook.  Facebook is expected to raise at least $5 billion – up to a rumored $10 billion – from the equity markets in coming months and will most likely file for the necessary regulatory approval to initiate the IPO on Wednesday. Competitors Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Barclays (NYSE:BCS) and Bank of America (NYSE:BAC) will assist Morgan Stanley in this mega-deal, which would potentially raise the investment bank to the top of the list of Global IPO managers for 2012.
We have a $21 price estimate for Morgan Stanley’s stock and attribute the 15% premium over current market price to the pessimistic outlook for banking stocks in the wake of economic slowdown and deteriorating European debt crisis.
Data compiled by Thomson-Reuters shows that Morgan Stanley held the top spot in equity underwriting deals just once in the last 7 years – in 2009. The bank, however, has a much better track record at managing IPOs globally, and has consistently been at the top when it comes to IPOs for technology firms. The Facebook deal will only reinforce this position for Morgan Stanley – more so when you consider the fact that the bank managed deals worth just above $10.3 billion last year to rank behind leader Goldman Sachs’ $11.8 billion in global IPOs.
Morgan Stanley can expect a handsome fee for this deal, with estimates pegging total fee revenues for all managers to cross half a billion dollar. Morgan Stanley will receive a lion’s share of this figure as the lead underwriter.
Goldman, which entered Facebook’s bad books with the dodgy handling of the social networking site’s private investment deal in 2010, will have to remain content at being able to assist Morgan Stanley this time around.Notes: