THE WINNER in the race to advise Facebook through its highly-anticipated public offering could earn an exceptional low of one per cent of gross proceeds for managing the flotation.
In their eagerness to bag the deal, contenders including Morgan Stanley and Goldman Sachs could agree to underwrite the IPO for a fraction of the typical paycheck.
A public offering that raises less than $500m (£318.8m) usually incurs a seven per cent fee, while an IPO of more than $1bn could command a fee of nearer five per cent.
However, at Facebook’s speculated float reaping of $10bn, the chosen underwriter would still pocket $100m – catapulting it to the top of the IPO league tables – as well as the prestige of putting its name to the coveted contract.
Morgan Stanley is understood to be top seed for the prominent deal, although Facebook is thought to be taking a dim view of such reports.
Goldman Sachs oversaw the private sale of $1.5bn of Facebook shares last year. While this deal attracted unwanted controversy, the advisory firm is expected to be invited to assist.
Both firms took social gaming company Zynga through its December flotation of $10 a share which, like Groupon, showed disappointing early trading – though both companies are now trading at roughly their IPO price.
However, Facebook’s pattern could be more akin to that of social networking site LinkedIn which, led by Morgan Stanley, raised $353m. Shares, which listed at $45, are now worth over $75.
All three deals earned their underwriters fees of three to five per cent.
Morgan Stanley was the top tech IPO adviser in 2011, reaping $2.2bn and an eleven per cent market share according to Thomson Reuters.
Goldman Sachs was close behind with nine per cent of the market and fees of $1.9bn.