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According to sources privy to the deal, Facebook has chosen Morgan Stanley as lead underwriter of their blockbuster IPO. The company plans to file on Wednesday under the ticker symbol FB on the New York Stock Exchange, according to PrivCo. The deal is expected to be priced at $38-$40 a share, giving Facebook an initial valuation of $90-95 billion.

Morgan Stanley won the coveted "left lead" position over Goldman Sachs due in part to Morgan's access to legions of generally less-sophisticated retail clients who are expected to run the stock up from the offering price. Goldman will still command a large piece of the deal, but this is a major win for Morgan Stanley's tech banking team.

In my opinion, pricing the deal in the $38-40 range per share is a stroke of genius. When you're dealing with retail investors (who, let's face it, are the rubes who will bid the stock up), less attention is paid to the overall valuation of the company than is paid to a perceived "low" stock price. LinkedIn priced at $45 and more than doubled on the open.

I think it's safe to say the IPO will be a big winner, and a massive feather in Morgan's cap. It's hard to imagine a scenario where the market for Facebook shares collapses in the early going. Of course, $100 billion is a stratospheric valuation, and if the Facebook IPO does what LinkedIn did on the open, that number is closer to $200 billion. One would think that cooler heads will prevail at some point.

I certainly won't be a buyer, but I'll be an avid observer. A lot of people are going to get rich when the IPO finally bows. Unfortunately, I doubt it'll be any of the rabble who scramble for shares in the aftermarket. Be that as it may, there's going to be some smiling faces at Morgan Stanley no matter what happens.

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Comments (32)

  • Abdel's picture

    yea, $38-$40 range.

    But when it opens for regular folks like me, price will be in the $80 - $100 range.

    I won't be a buyer.

  • Ambition's picture

    ^^ correct it will have already doubled by the time I even will be able to use it.

    I want a lady on the street, but a freak in the bed,

    Go Bucks!!

  • dmackorth's picture

    Eddie,
    Do you knwo the timeline of the whole deal? When will this deal be brokered?

    Essentially, I want to know if MS Equity S&T interns will be there when this is brokered and markets are being made...

    That would be sick.

  • TonyPerkis's picture

    Read an article today that said not to invest..that facebook doesn't have any more upward potential and that it may have grown too quickly.
    http://www.irishtimes.com/newspaper/features/2012/...

    I eat success for breakfast...with skim milk

  • In reply to dmackorth
    pingafrita's picture

    dmackorth:
    Eddie,
    Do you knwo the timeline of the whole deal? When will this deal be brokered?

    Essentially, I want to know if MS Equity S&T interns will be there when this is brokered and markets are being made...

    That would be sick.


    May target so no.
  • dmackorth's picture

    Ahh I see...

    Well we'll see how it turns out, could get help up a bit. But even so, the market-making and flow immediately after should pretty amazing...

    I am sure MS would be the lead market maker

  • ivoteforthatguy's picture

    so the bubbletron is fired up and running at full power once again. any idiot who buys this POS deserves to lose his shirt.

  • upod01's picture

    Let's see if it actually opens at that price.

    When luck shuts the door you gotta come in through the window - Doyle Brunson

  • dwight schrute's picture

    This means company financials will be forthcoming...

    Making money is art and working is art and good business is the best art - Andy Warhol

  • moneymogul's picture

    I can't believe how insanely loaded some people are about to become.

    "Be a yardstick of quality. Some people aren't used to an environment where excellence is expected." - Jobs

  • low_key's picture

    Net income of $750mi-$1bil with slowing growth in the last 5 years yet some how gets $100bil valuation. How is this possible? Google has market cap. of $188bil but with a net income of $9.7bil and revenues of close to $38 bil. WTF???

  • Tupac's picture

    Edmundo Braverman:
    According to sources privy to the deal, Facebook has chosen Morgan Stanley as lead underwriter of their blockbuster IPO. The company plans to file on Wednesday under the ticker symbol FB on the New York Stock Exchange, according to PrivCo. The deal is expected to be priced at $38-$40 a share, giving Facebook an initial valuation of $90-95 billion.

    Morgan Stanley won the coveted "left lead" position over Goldman Sachs due in part to Morgan's access to legions of generally less-sophisticated retail clients who are expected to run the stock up from the offering price. Goldman will still command a large piece of the deal, but this is a major win for Morgan Stanley's tech banking team.

    In my opinion, pricing the deal in the $38-40 range per share is a stroke of genius. When you're dealing with retail investors (who, let's face it, are the rubes who will bid the stock up), less attention is paid to the overall valuation of the company than is paid to a perceived "low" stock price. LinkedIn priced at $45 and more than doubled on the open.

    I think it's safe to say the IPO will be a big winner, and a massive feather in Morgan's cap. It's hard to imagine a scenario where the market for Facebook shares collapses in the early going. Of course, $100 billion is a stratospheric valuation, and if the Facebook IPO does what LinkedIn did on the open, that number is closer to $200 billion. One would think that cooler heads will prevail at some point.

    I certainly won't be a buyer, but I'll be an avid observer. A lot of people are going to get rich when the IPO finally bows. Unfortunately, I doubt it'll be any of the rabble who scramble for shares in the aftermarket. Be that as it may, there's going to be some smiling faces at Morgan Stanley no matter what happens.

    Can you clarify why MS was chosen? Basically they think that they will be able to get more buyers, as their clients are the type who are more likely to buy this? How does this affect the "legendary" tech group at GS?

  • RagnarDanneskjold's picture

    I still cannot fathom how they think Facebook equals 1/4 the value of motherfucking XOM.

  • DebunkingMyths's picture

    Here's how you can back into facebook's valuation - using some rough ballpark numbers

    Global ad spending is approximately estimated at 500bn in 2015
    1/3 of that is online spending - so approx 160bn USD
    1/3 - 1/5 of online is in display (vs search and others) so approx 50-60Bn to be safe
    Facebook's current market share is ~30% - let's say it is anywhere from 30-50% in 5 years

    Facebooks margins are unknown but let's assume 30% to be conservative again - that's net income of approx 30% * 30% * 60Bn

    That is about 9 - 12Bn USD of Net income.

    Google trades at a P/E of 16x - - this gives Facebook implied valuation of approx 115 - 190Bn USD. This is a pretty conservative valuation since in 5 years, facebook's growth rate will arguably be higher than google's currently

    Discount it back at say 15% - you will arrive at approx a 90Bn valuation.

    That's a lot of assumptions but none of them are TOO ridiculous. You have to understand Google has 80% of the search ad market - of displays, it has very little - that's why it's getting into Google +.

    Also, this is JUST ads. Facebook also has payments from Zynga, etc - so there is room for upside. obviously downside exists as well. 90Bn is not cheap on an absolute basis but def not expensive on a relative basis.

    Doubling on day one I don't see as likely.

    You guys forget, the amt of money trading around these stocks doesnt appear out of thin air. LNKD's offering will be < 10% of this... meaning 10Bn of capital needs to come from somewhere. And doubling overnight means 180Bn - that will make this thing too expensive.

    I think facebook pops 30-40% on day one then tapers off to 20% for the 1st week. Rest will depend on its growth. It definitely has lots of challenge but is also in a pretty decent spot - feel free to discuss / argue

  • DebunkingMyths's picture

    To add - I would go long GOOG. Also this is why you see stocks like RENREN and the other internet stocks all rallying because they are hoping for a re-rating once facebook lists. RENREN is up 30% or something in 2 days

    Also if the stock IPOs at 98Bn then that means I can quit my job - woohoo - i digress

  • GoodBread's picture

    More importantly, will this make Goldman lose it's top spot in Vault's finance-wide prestige rankings?

  • WallStreetOasis.com's picture

    how is Vault still alive? They employ like 100+ people and WSO has more reach than they do....I guess their installed base of licenses in the career centers is keeping them afloat, but looks like they are fading online. and the competition is just getting bigger and better (see http://www.wallstreetoasis.com/wso-company-database). :-)

    Did I ever tell you guys I met with the founder of Vault back when I was at Wharton and he flat out told me "You have no business."? good times...

  • GoodBread's picture

    Yeah, being 'first' probably made a big difference. I actually had never heard of investment banking or consulting until I saw a Vault guide. I ended up discovering WSO shortly thereafter.

  • In reply to WallStreetOasis.com
    wolverine19x89's picture

    WallStreetOasis.com:
    how is Vault still alive? They employ like 100+ people and WSO has more reach than they do....I guess their installed base of licenses in the career centers is keeping them afloat, but looks like they are fading online. and the competition is just getting bigger and better (see http://www.wallstreetoasis.com/wso-company-database). :-)

    Did I ever tell you guys I met with the founder of Vault back when I was at Wharton and he flat out told me "You have no business."? good times...

    hahaha, you can taste the hostility

    I don't even remember where I heard of WSO... it might have been on college confidential

    anyways... What's going on with facebook getting pissed at Morgan Stanley? It'd be hilarious if facebook told them to fuck off and went back to Goldman lol

    If your dreams don't scare you, then they are not big enough.

    "There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

  • rhetoric's picture

    Cannot wait to see financial statements

  • mongoose's picture

    I heard of WSO on CollegeConfidential. WSO should advertise there.

  • In reply to WallStreetOasis.com
    Ambition's picture

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    I want a lady on the street, but a freak in the bed,

    Go Bucks!!

  • In reply to WallStreetOasis.com
    happypantsmcgee's picture

    If I had asked people what they wanted, they would have said faster horses - Henry Ford

  • DonMunich's picture