Facebook shares decline deflates internet banking star
HOTSHOT Morgan Stanley banker Michael Grimes is the target of some angry finger pointing after Facebook’s share price fall since its debut on Friday.
In many ways he shouldn’t be surprised. In the run-up to the float, Grimes was the subject of a number of press reports extolling his prominence in the technology sector, detailing the way in which he stole lead position on the account from rivals and generally outlining his all-out star banker status.
In other words, Grimes had the profile that any other investment banker would want and because he had it, rather than them, he has quickly become the butt of criticism as things have not gone absolutely according to plan on the year’s most talked about flotation
For Grimes, Facebook was the largest of a series of IPOs that have cemented his position as the go-to man in his sector. It started with LinkedIn last May and continued with the IPO of internet radio group Pandora, deals site Groupon and social gaming firm Zynga.
That the Facebook float struggled since its launch day has given Grimes’ critics plenty of ammunition.
Why did Morgan Stanley re-price the issue upwards at the last minute when one of its own research analysts was revising forecasts downwards?
Why did it not seek more advice from the other banks working on the deal, including JP Morgan, Goldman Sachs and Barclays? Bankers say it very much took the lead on this deal, making most of the major decisions without a lot of input from the rest of the banking syndicate.
Some are asking more straightforwardly whether Morgan Stanley, in its quest to be the lead banker, just got the valuation plain wrong, overvaluing Facebook massively.
In its defence the bank argues that the issue got away on Friday without any of it landing on the laps of the underwriters, which is no mean feat given an issue of such size and given the problems of the Nasdaq market that saw a closedown in trading for 30 minutes.
Bankers say that Morgan Stanley was determined not to re-live the experience of LinkedIn, whose shares surged 50 per cent on their debut, leaving many saying the issue had been underpriced.
With Facebook shares now around 18 per cent below their issue price and with Grimes’ reputation built up so high ahead of the deal, he faces the prospect of days if not months of questioning about the way he has handled the deal.
david.hellier@cityam.com