現在位置:財稅 > 首次公開募股(IPO)與臉書(Facebook)
2012年2月2日,Facebook周三盤後向美國證券交易委員會(SEC)正式遞交了首次公開募股(IPO)申請,計劃融資50億美元。Facebook將於5月18日在納斯達克進行IPO,股票代碼為“FB”,首次公開募股(IPO)的指導價區間定在每股28-35美元。5月17日收盤後facebook將首次公開募股(IPO),售價定在每股38美元,募集資金將達到160億美元,市值超過1000億美元,成為美國曆史上規模最大的互聯網公司IPO案例。
首次公开募股(IPO)的过程:你拥有Facebook的股份嗎?
By Nicole Lee 很久很久以前,首次公开发行(IPO)是许多科技创业的比赛结束:你可以去公司上市,或被收购,或者是一个壮观的死亡。 或者只是得过且过,死一个更慢更痛苦的死亡。有一个公司走过来,改变了这一切。 虽然大家一直着迷于Facebook的IPO今天,伟大的具有讽刺意味的是,Facebook本身已经上市比以往任何时候都少有关。 下面是如何在IPO过程中正常工作,当你在一家银行,和Facebook的对颠覆最重要的是 - 和成千上万的人很富裕的过程中: 首次公开发售(IPO)是什么? 这是第一次,以前的私人公司可以出售其股份的“大众”(主要是机构投资者在第一)。 通常情况下,公司发行约20-30%的股份(自由浮动),虽然不同行业,公司阶段,等等。 大多数投资者认为高风险,如果该公司只提供低的股数 - 但如果该公司是“热”(见:脸谱,其11%的销售),他们会忽略这一点,潜水头高跟鞋反正。 为何要上市? 您可能关联与高科技,医疗保健,生物技术初创企业的首次公开募股,但它们适用于公司,而不是更广泛的范围内。 你看到的一切,从成熟的商业服务公司,能源公司,运输企业上市,但他们却很少关注的热门技术创业公司。 大多数公司上市: ■ 提高资本扩张的努力或偿还债务。 ■ 提供一个退出现有的投资者 - 无论是公司资PE,VC支持,或一小群个人或一个人所拥有的。 ■ 获取收购资金 - 大部分私营公司的股票价值不高,所以它更容易获得其他公司的股票,一旦他们公开。举债做交易一旦你公众可以更容易。 ■ 奖励员工 - 员工的工作疯狂的时间为5-10年是很难拉断,但首次公开发行的诱惑,这将使他们的富裕是一个很大的激励,他们坚持。 ■ 市场本身 - 在“无聊”的行业,特别是对于不太知名的公司,IPO是一个伟大的方式来提高威望和吸引新的投资者,合作伙伴和客户。 有时也有技术上的原因还有:在美国,例如,“500股东规则”要求任何超过500名股东的私人公司公开披露的财务报表... 因此,他们还不如去公共和获得其他的好处 - 这是为什么谷歌决定在2004年上市的重要原因之一。 为什么是Facebook上市?没有以上! ■ 它的现金丰富,是非常赚钱的,所以它没有对资金的需求。 ■ 出售给其他人通过二次交换或在后期的成长型股权融资,其投资者和早期员工已经退出 - 不存在的,在过去的选项。 ■ 它一直有一个伟大的收购货币,因为它是值得很多民营股份制和被交投活跃这些次要的交流上。 ■ 来吧,是否真的需要更多的营销和炒作吗? ■ 哦,是的,500股东的规则是在复杂多变的改革,和Facebook反正发放限制性股票单元(RSU),而不是实际的股份或购股权,以员工为公司的发展得到了解决。 已经提出了多种理论,为什么它的真正上市: ■ 有些人仍然认为500股东的规则,迫使他们的手,即使它很快就被提高到2,000股东。 ■ 许多人认为,长期资本利得税率将增加在不久的将来 - 如果他们去公共和员工出售股票,他们会支付15%,而不是潜在的高得多的速度。你可以问爱德华Saverin问题的答案... ■ 其他人员推测,他们用这些钱神秘的新货币化的方法,将扩大其收入基础,超越广告。 就我个人而言,我不买任何个人原因 - 它很可能是综合上述各点,再加上后期投资者仍然需要有人出售其股份。 上市的缺点,以及为什么Facebook首次公开发行不相关的吗? 有些公司不希望去公共(或上市),因为: ■他们必须放弃控制权,并回答股东的季度盈利报告。 ■他们不是VC或PE支持的,因此并不需要一个出口。 ■他们已经在高利润,也没有必要的现金。 ■作为一家上市公司,由于立像“萨班斯 - 奥克斯利法案”合规性成本要高得多。 他们太小 - 这是很难去下,如果你有5000万美元的收入。 不过,Facebook改变了规则,在这里,因为: 1)马克·扎克伯格(Mark Zuckerberg)保持更多的控制比典型的创始人投票权及无投票权股份的股票拆分到,通过控制董事会,和销售几乎没有什么前进的道路上; 2)筹得200万美元从数字天空技术(DST)于2009年5月,然后一个更大的圆2011年1月为150亿美元,从而有效地给早期投资者退出他们所需要的。 的崛起,二次交流,如二板市场,投资者可以购买和出售私人公司股份,使得它更容易为早期员工兑现之前,该公司曾上市。 倘本公司上市,谁决定? 在大多数情况下,向董事会和大股东。 因此,如果一个私募股权投资公司拥有一家公司,他们需要在4或5年实现退出,获得可接受的回报,他们可能会推动公司上市(或收购)左右。 历来以同样的方式工作,往往最终控制高科技初创企业与风险投资公司。 但由于Facebook的CEO拥有28%的股票和56%的投票权,他有更多的回旋余地比一般的创始人/ CEO - 可以在一个周末的10亿美元的收购,甚至没有通知董事会作出决定。 但即使有这么大的控制,他将不能够启动类似的IPO,而不在其他人拉 - 有太多的工作要做,太多的决定,在这个过程中。 IPO过程 第1部分 - 间距 在大多数情况下,银行家们从许多公司已与该公司发言的问题,并发展了多年的关系 - 因此他们很可能会提前知道公司的意图。 如果没有,公司本身将达到银行家,并邀请他们在球场的业务。 这是当你的银行分析师或联营公司,熬夜制作100页的间距书籍,希望你记得点你我的,跨越所有的t的。 之后该公司选择银行账簿管理人角色,并挑选其他银行的联合经理人,与他们的关系,他们的球场,银行已为他们做什么,在过去的基础上。 其他因素可能包括银行的IPO纪录和自己的声誉,并与机构投资者的关系。 在Facebook的情况下,起初人们认为,高盛(Goldman Sachs)将登陆带头作用,因为它帮助安排2011年的1.5亿美元的融资,... 但随后GS拙劣的交易获得美国证券交易委员会的不好的一面时,包括其在美国的客户在第一,然后撤销的要约后 - 在摩根士丹利赢得了铅现货。 大多数上市至少有1-2家银行作为簿记,然后几个联合经理人,Facebook是不寻常的,因为它有12家银行,由于本次发行的规模和声誉。 第2部分 - 启动会议 每个人都参与IPO - 公司管理,核数师,会计师,承销银行,以及来自四面八方的律师 - 出席本次会议。 花一天时间讨论提供,所需的登记表,找出谁在做什么,并决定何时提交。然后你也有类似的全体员工大会,这整个过程的其余部分。 它实际上是相当枯燥的,因为你不参与,你作为一个初级银行家参加这些太多了 - 你大多只是做笔记。 正在进行尽职调查 之后,最初的启动会议,所有银行家,会计师和律师参与的公司,需要做大量的尽职调查,以确保他们的登记报表准确。 这里的常见任务包括: ■ 客户来电 - 这可能是最有趣的任务,因为有时你听到疯狂的/有趣的事情,否则你永远不会了解的客户。 ■ 行业/市场尽职调查 - 你必须研究市场,说话的专家,并找出它可能是未来的走向。 ■ 法律和知识产权尽职调查 - 律师处理大部分 - 包括合同审查,注册和其他文件。你是不是很高兴你不想成为一名律师? ■ 财务和税务尽职调查 - 会计师做的最重要的和梳子通过历史财务报表,纳税申报表,等等,看的违规行为。 Facebook是一个有趣的例子,因为“顾客要求”适用于以不同的方式从你所期望的 - 他们的“客户”是这么多,因为在网站上做广告的公司,而不是个人用户。 所以,银行家们在这里可能称为的大型广告客户,也花费了时间的重要合作伙伴,如Zynga的交谈。 他们可能会问这样的问题: ■您是否计划增加/减少广告支出? ■一直像这样的公司,你有什么关系? ■你看到了什么作为向前发展的关键风险? ■你什么其他的社交网络上做广告,你怎么想的? 第3部分 - S-1文件 这整个过程的最终结果,这可能需要几个月的时间,是S-1注册声明(在其他国家的名称各不相同)。 这是所有的丰富的信息 - 历史财务报表,主要数据,谁在抛售股票,他们销售多少,公司概况,风险因素,以及更多。 当Facebook提出了自己的S-1,有这么多的游客,政府的网站上确实崩溃了。 公司等待时间为30个日历天,从美国证券交易委员会(或同等机构在其他国家)的意见,法律团队的一切,一旦他们听到。 请注意,该公司从未在其S-1列出了预计的财务报表 - 他们可能内部有预测,当然,但他们没有登记表的一部分。 第4部分 - 预售发售 一旦提交了S-1和团队正在努力通过修订,该公司首次公开招股前举行的分析师会议上,教育银行家和分析师,他们对公司的“教”他们如何将其出售给投资者。 它也开始对投资者来讲,并发出了“红鲱鱼”(初步招股),银行汇票(类似于S-1,但更短,更专注于销售)。 鼓励公司要等到美国证券交易委员会的S-1与意见,在打印前红鲱鱼。 本文件可以省略发行价格,承销折扣/佣金,折扣/给经销商的佣金,金额的收益,等等 - 它只是向投资者销售公司的故事。 一旦这个文件是在地方,市场推广前期开始,通常持续2周左右。 研究分析师与机构投资者见面1对1的,并告诉他们的公司,并在银行的销售团队与投资者保持密切的联系,并找出他们的想法 - 做自己喜欢的行业?该公司本身吗?他们将付出什么样的价格? 基于这些会议的反馈和自己的内部估值,银行此次发行的价格区间。 与一些公司,这可能是启发性的,与Facebook,这是很无聊的,因为该公司已经在IPO前的二次交流交投活跃,所以每个人都知道会是什么粗略的价格范围。 采摘投资者市场 一位银行不只是投资者挑选随机 - 他们选择等标准的企业: ■经纪佣金 - 如果你正在做吨的钱由若干机构投资者,他们将高优先级列表。 ■利息及往绩记录 - 例如,如果企业没有技术投资,银行可能只是跳过科技IPO。 ■潜在的经纪费 - 如果银行希望在未来赢得更多业务的机构,它可能会显示一个“热”IPO是一种恩惠。 的股权集团,销售和路演的管理团队处理这一过程。 修订的S-1文件 在这一切的市场推广前期工作已经完成,银行修订的S-1文件,修改了价格范围,根据投资者的反馈意见。有时会出现戏剧性的变化,在价格范围内,但更常见的是在一个方向或其他的小动作。 再次,由于Facebook股票已经被交投活跃的发行前的过程中,这部分可能是有趣的。 第5部分 - 路演 现在的乐趣,排气过程的一部分:管理变得走遍1-2周,以满足投资者和市场的公司。 管理团队有时让自己很开放,方便和走出去的方式来拉拢投资者,并回答问题。 马克·扎克伯格(Mark Zuckerberg)采取了完全相反的方法,主要是因为他能买得起 - 他可能会显示为0,会议和投资者仍然会下降超过自己股份。 不过,对于一般的公司,这个过程是非常重要的,因为订单是在这个时候 - 投资者能说出多少股份,他们想要的,他们愿意付出什么样的代价。 管理得到每日更新的订单正在寻找像什么,以及过程中所涉及的银行都尝试一个相互声称,他们赢得投资者的最大的订单。 在这段时间里,银行家们越来越多投资者的反馈,并可能进一步调整的价格范围内 - 这就是为什么Facebook改变了它自己的范围从$ 28 - $ 34至$ 34 - 38美元。 这是一个棘手的平衡的行为,因为没有人希望到假钱放在桌子上 - 银行家想要一个更高的每股价格,所以他们可以赚取更高的费用,股东谁是销售明显要更高的价格,该公司要高一个价格作为可能最大限度地发挥他们的现金收入。 但是,如果价格范围定得太高,银行家们可能要修改,向下,向市场发出一个负面的信号。 在此期间,该公司也可能增加或减少的数量股份它的发售 - 但如果它的确是太多(任一方向)它可以被采取作为一个负号,因为投资者可能会认为该公司没有不知道是什么感觉做的收益。 已经有很多的辩论,Facebook的产品(如公司,小,但有很高的绝对美元计算的百分比)的大小和价格。 全球各地的公司相对较少,沙许多观察人士认为,Facebook可能被高估,在其目前的价格范围内,这种增长可以不上不下的实际价值超过100美元十亿美元。 是什么使Facebook的估值不确定的部分,其未来的业务可能远不同于今天是什么样子的 - 甚至是显着的广告收入可能在5-10年及付款,手机,还是其他什么东西完全可能接管。 第6部分 - 定价会议 一旦路演结束了,关闭的订单,管理团队将与银行家会面,并决定这笔交易的最终价格根据收到的订单。 如果一个交易获超额认购,该公司将公司的定价在高端的范围,并会做相反的认购交易。 有时管理会刻意定价的公司以较低的价格(在桌子上留下了一些钱)这样的股票可以交易的第一天的交易 - 始终是一个积极的迹象的市场。 通常公司后的第一天交易,坦克也很难恢复,又回到了他们最初的价格。 对于Facebook而言,显然是非常积极的反馈,因为它的价格为$ 38 - 范围的高端。 第7部分 - 分配 一旦交易价格,银行集团的团队将分配股份予投资者。 银行分配给投资者,将长期持有的股票,银行可能失之偏颇倍,回报投资者产生最高的经纪佣金(如对冲基金非常积极的贸易)。 该集团的团队通常过夜分配交易。 第8部分 - 交易 一旦交易分配,每个人都有自己的股份,股票开始交易和“大众”可以购买和出售股票。 所以,银行赚取多少钱从所有这一切吗? IPO费用一般为3- 7%的公司,它是知名的大小,多少额外的工作和风险的银行必须把它卖掉。 是的,你是正确的:提供1亿美元,银行可能使700万美元(现在你明白为什么他们赚那么多钱)。 但是,对于非常大的产品,费用下降,并进一步下降时,它的“热”,每个人都想参与。 所以,Facebook是唯一的支付银行家的产品,该产品将仍然等于1.76亿美元当一切都说过和做过的1.1%的手续费。 银行家,被卷入有史以来最大的科技IPO的价值远远超过甚至大幅增加的费用,因为他们推销自己,根据他们的记录。 是否对齐的费用? 这取决于多少银行家实际上是帮助。 对于一些像Facebook,费用比正常肯定是不太合理的,银行家们帮助管理流程,做了很多琐碎的工作,但谁真正需要令人信服的购买Facebook的股票呢? 费用更合理,更小,不太知名的公司,需要真正的销售 - 当银行家实际上是帮助解决关键投资者的担忧,在公司赢得更多的利益。 早在一天,银行承担的巨大风险,自己先买股票,然后再销售(“坚定承诺”),这是他们用来证明更高的费用。 但是,这是不常见的,所以在收费有一定的下调压力。 你会在购买FB股份? 我避而远之,因为伟大的公司并不一定能使我们伟大的投资。 此外,首次公开招股进行市场2-3% - 而不是一个伟大的标志,如果你去统计。 当然了,到时候你读这股价格可能会“突然”到一个更高的数量,并没有投资,我会看傻了。 但是,我们将看到的情况来看个月,6个月,或一年后。 如果你决定投资前,让我们知道如何去和你在什么样的价格(或退出)。 |
The Initial Public Offering (IPO) Process: Got Facebook Shares? By Nicole Lee
A long time ago, initial public offerings were the end game for many technology start-ups: you could go public, get acquired, or die a spectacular death. Or just muddle along and die a slower, more painful death. And then one company came along and changed all that. While everyone has been obsessing over Facebook’s IPO today, the great irony is that Facebook itself has made IPOs less relevant than ever before. Here’s how the IPO process normally works when you’re at a bank, and what Facebook did to upend most of that – and make thousands of people very wealthy in the process: What is an Initial Public Offering (IPO)? It’s the first time that a previously private company can sell its shares to “the general public” (mostly institutional investors at first). Usually the company issues around 20-30% of its shares (free float), though this varies by industry, company stage, and so on. Most investors consider it riskier if the company only makes available a low number of shares – but if the company is “hot” enough (see: Facebook, with its 11% offering) they’ll overlook this and dive in head-over-heels anyway. Why Go Public? You probably associate IPOs with tech, healthcare, or biotech start-ups, but they apply to a much wider range of companies than that. You see everything from mature business service companies to energy firms to transportation firms going public, but they get far less attention than hot tech start-ups. Most companies go public to: ■ Raise capital for expansion efforts or to pay back debt. ■ Provide an exit for existing investors – whether the company is PE-owned, VC-backed, or owned by a small group of individuals or a single person. ■ Get an acquisition currency – most private companies’ stock is not highly valued, so it is much easier to acquire other companies using stock once they’re public. And raising debt to do deals can be easier once you’re public as well. ■ Reward employees – Making employees work crazy hours for 5-10 years is tough to pull off, but the lure of an IPO that will make them all wealthy is a great incentive for them to stick around. ■ Market themselves – Especially for lesser-known companies in “boring” industries, an IPO is a great way to increase prestige and attract new investors, partners, and customers. And sometimes there are technical reasons as well: in the US, for example, the “500 shareholder rule” used to require any private companies with more than 500 shareholders to publicly disclose their financial statements… …So they might as well just go public and get the other benefits – this was one of the key reasons why Google decided to go public in 2004. Why is Facebook going public? None of the above! ■ It’s cash-rich and massively profitable, so it has no need for capital. ■ Many of its investors and early employees have already exited by selling to others via secondary exchanges or in late-stage growth equity financings – options that didn’t exist in the past. ■ It has always had a great acquisition currency because its private stock was worth a lot and was actively traded on these secondary exchanges. ■ Come on, does it really need more marketing and hype? ■ And oh yeah, the 500-shareholder rule is in the midst of a revamp and Facebook got around it anyway by issuing Restricted Stock Units (RSUs) rather than actual shares or options to employees as the company grew. A number of theories have been put forth for why it’s really going public: ■Some people still think the 500-shareholder rule forced their hand even though it’s being raised to 2,000 shareholders soon. ■Many believe that long-term capital gains tax rates will increase in the near future – if they go public and employees sell stock now, they’ll pay 15% rather than a potentially much higher rate. You can ask Eduardo Saverin about that one… ■Others have theorized that they’re using the money for mysterious new monetization methods that will expand their revenue base beyond advertising. Personally, I don’t buy into any of those as individual reasons – it was likely a combination of some of the points above, plus the fact that late-stage investors still need someone to sell their shares to. The Downsides of Going Public… and Why Facebook Made IPOs Irrelevant? Some companies don’t want to go public (or can’t go public) because: ■ They have to give up control and answer to shareholders with quarterly earnings reports. ■ They aren’t VC or PE-backed and therefore don’t need an exit. ■ They’re already highly profitable and have no need for cash. ■ Compliance costs are much higher as a public company due to legislation like Sarbanes-Oxley. ■ They’re too small – it’s tough to go public if you have under $50 million in revenue. But Facebook changed the rules here because: 1) Mark Zuckerberg maintained far more control than typical founders by splitting the stock into voting and non-voting shares, by controlling the Board, and by selling almost nothing along the way; and 2) It raised $200 million from Digital Sky Technologies (DST) in May 2009, and then an even bigger round of $1.5 billion in January 2011, which effectively gave early investors the exit they needed. The rise of secondary exchanges like Second Market, where investors can buy and sell private company shares, has made it much easier for early employees to cash out long before the company ever goes public. Who Decides if the Company Should Go Public? In most cases, it’s up to the Board and major shareholders. So if a private equity firm owns a company and they need to achieve an exit in year 4 or 5 to get acceptable returns, they might push for the company to go public (or get acquired) around then. And it has traditionally worked the same way with venture capital firms that often end up controlling tech start-ups. But since Facebook’s CEO owns 28% of its stock and 56% of its voting rights, he has significantly more leeway than the usual founder/CEO – and can make decisions on billion-dollar acquisitions in a weekend without even notifying the Board. Even with that much control, though, he would not be able to initiate something like an IPO without pulling in everyone else – there’s far too much work to do and too many decisions to be made in the process. The IPO Process, Part 1 – The Pitch In most cases, bankers from many firms have been speaking with the company in question and developing relationships for years – so they’re likely to know the company’s intentions well in advance. If not, the company itself will reach out to bankers and invite them in to pitch for the business. This is when you, the banking analyst or associate, get to stay up all night crafting 100-page pitch books and hoping you’ve remembered to dot all your i’s and cross all your t’s. Afterwards, the company selects banks for book runner roles and picks other banks to be co-managers, based on its relationships with them, their pitches, and what the banks have done for them in the past. Other factors might include banks’ IPO track records and their reputation and relationships with institutional investors. In the case of Facebook, at first people thought that Goldman Sachs would land the lead role because it helped arrange $1.5 billion of financing in 2011… But then GS botched the deal by getting on the SEC’s bad side when it included its US clients at first, and then revoked the offer later – resulting in Morgan Stanley winning the lead spot. Most IPOs have at least 1-2 banks as book runners and then a few more as co-managers; Facebook is unusual because it has 12 banks due to the size and prestige of the offering. Part 2 – The Kick-Off Meeting Everyone involved in the IPO – company management, auditors, accountants, the underwriting banks, and lawyers from all sides – attends this meeting. You spend the day discussing the offering, the required registration forms, figure out who’s doing what, and determining the timing for the filing. And then you have similar all-hands meetings like this throughout the rest of the process. It’s actually quite boring for you as a junior banker attending these because you don’t participate too much – you’re mostly just there to take notes. Ongoing Due Diligence After that initial kick-off meeting, all the bankers, accountants, and lawyers involved need to do a lot of due diligence on the company to make sure that their registration statements are accurate. Common tasks here include: ■ Customer Calls – This is probably the most interesting task, because sometimes you hear crazy / interesting things from customers that you’d never learn about otherwise. ■ Industry / Market Due Diligence – You’ll have to research the market, speak with experts, and figure out where it might be headed in the future. ■ Legal and IP Due Diligence – Lawyers handle most of this – it consists of reviewing contracts, registrations, and other documents. Aren’t you glad you don’t want to be a lawyer? ■ Financial and Tax Due Diligence – Accountants do most of this and comb through historical financial statements, tax returns, and so on, and look for irregularities. Facebook is an interesting example because “customer calls” apply in a different way from what you might expect – their “customers” are not individual users so much as the companies that advertise on the site. So bankers here likely called the larger advertisers and also spent time talking to key partners such as Zynga. They might ask questions like: ■ Are you planning to increase / decrease advertising spending? ■ What’s your relationship with the company been like so far? ■ What do you see as key risks going forward? ■ What other social networks do you advertise on, and what do you think of them? Part 3 – The S-1 Filing The end result of this entire process, which might take months, is the S-1 Registration Statement (names vary in other countries). This is where all the juicy information comes out – historical financial statements, key data, who’s selling shares and how many they’re selling, the company overview, risk factors, and more. When Facebook filed its own S-1, there were so many visitors that the government’s site actually crashed. The company waits 30 calendar days for comments from the SEC (or equivalent organization in other countries), and the legal team responds to everything once they hear back. Note that the company never lists projected financial statements in its S-1 – they might have projections internally, of course, but they’re not part of the registration statement. Part 4 – Pre-Selling the Offering Once the S-1 is filed and the team is working through revisions, the company can hold a pre-IPO analyst meeting where they educate bankers and analysts on the company and “teach” them how to sell it to investors. It can also start speaking to investors and issue a “red herring” (preliminary prospectus), which bankers draft (similar to the S-1, but shorter and more focused on sales). Companies are encouraged to wait until the SEC responds to the S-1 with comments before printing the red herring. This document may omit the offering price, underwriting discounts / commissions, discounts / commissions to dealers, the amount of the proceeds, and so on – it’s just about selling the company’s story to investors. Once this document is in place, pre-marketing starts and usually lasts around 2 weeks. Research analysts meet with institutional investors 1 on 1 and tell them about the company, and sales teams at banks maintain close contact with investors and figure out what they think – do they like the sector? The company itself? What price will they pay? Based on feedback from these meetings and their own internal valuations, banks set a price range for the offering. With some companies this can be enlightening; with Facebook it was quite boring because the company had already been actively traded on secondary exchanges long before the IPO, so everyone knew what the rough price range would be. Picking Investors to Market To A bank doesn’t just pick the investors randomly – they select firms based on criteria like: ■ Brokerage Commissions – If you’re making tons of money from certain institutional investors, they’ll be high on the priority list. ■ Interest and Track Record – If the firm never does tech investments, for example, the bank may just skip showing them tech IPOs. ■ Potential Brokerage Fees – If a bank wants to win more business from institutions in the future it might show them a “hot” IPO as a favor. The equity syndicate, sales, and road show management teams handle this process. Amending the S-1 Filing After all this pre-marketing work is done, banks amend the S-1 filing with a revised price range based on feedback from investors. Sometimes there are dramatic shifts in the price range, but it’s more common to see small moves in one direction or the other. Once again, since Facebook stock had already been actively traded long before the offering, this part of the process likely wasn’t as interesting for them. Part 5 – The Roadshow And now for the fun, exhausting part of the process: management gets to travel all over to meet with investors and market the company for 1-2 weeks. Sometimes management teams make themselves very open and accessible and go out of their way to win over investors and answer questions. Mark Zuckerberg took the exact opposite approach, mostly because he could afford to – he could show up to 0 meetings and investors would still be falling all over themselves to get shares. For normal companies, though, this process is extremely important because orders are also taken at this time – investors can state how many shares they want and what price they’re willing to pay. Management gets daily updates on what the orders are looking like, and the banks involved in the process all try to one-up each other by claiming that they won the biggest orders from investors. During this time, bankers keep getting more and more feedback from investors and may further revise the price range – that’s why Facebook changed its own range from $28 – $34 to $34 – $38. It’s a tricky balancing act because no one wants to leave money on the table – bankers want a higher share price so they can earn higher fees, shareholders who are selling obviously want a higher price, and the company wants as high a price as possible to maximize their cash proceeds. But if the price range is set too high, bankers may have to revise it downward, which sends a negative signal to the market. During this time, the company might also increase or decrease the number of shares it’s offering – but if it does that too much (in either direction) it may be taken as a negative sign because investors might think the company doesn’t know what it’s doing with the proceeds. There’s been a lot of debate over both the size of Facebook’s offering (as a percentage of the company, small, but very high in absolute dollar terms) and the price. Relatively few companies worldwide are actually worth more than $100 billion USD, sand many observers think that Facebook may be overvalued at its current price range and that growth could be flattening out. Part of what makes Facebook’s valuation so uncertain is that its future business might be far different from what it looks like today – advertising revenue might not even be significant in 5-10 years and payments, mobile, or something else entirely might take over. Part 6 – The Pricing Meeting Once the roadshow is over and the order book is closed, the management team will meet with bankers and decide on the final price of the deal based on the orders received. If a deal is over-subscribed, the company will price the company at the high end of the range and will do the opposite for under-subscribed deals. Sometimes management will deliberately price the company at a lower price (leaving some money on the table) so the stock can trade up on the 1st day of trading – always a positive indicator to the market. Usually companies that tank after the 1st day of trading have a hard time recovering and getting back to their initial price. Feedback was clearly very positive for Facebook, since it set its price at $38 - the high end of the range. Part 7 – Allocation Once the deal is priced, the syndicate team of the banks will allocate shares to investors. While banks try to allocate to investors who will be long-term holders of the stock, banks may be biased at times to reward investors that generate the highest brokerage commissions (e.g. hedge funds who are trade very actively). The syndicate team usually works overnight to allocate the deal. Part 8 – Trading Once the deal is allocated and everyone has their shares, the stock starts trading and “the general public” can buy and sell shares. So, How Much Do Banks Earn From All This? IPO fees typically range from 3 – 7% depending on the size of the company, how well-known it is, and how much extra work and risk banks have to take on to sell it. Yes, you read that correctly: for a $100 million offering, banks could potentially make $7 million. But for extremely large offerings the fee drops, and it drops even further when it’s “hot” and everyone wants to be involved. So Facebook is only paying bankers a 1.1% fee on its offering, which will still equal $176 million when all is said and done. For bankers, being involved in the largest tech IPO ever is worth far more than even a substantial increase in fees because they market themselves based on their track records. Are the Fees Justified? It depends on how much the bankers actually help. For something like Facebook, the fees are less justified than normal– sure, the bankers help manage the process and do a lot of the grunt work, but who really needs convincing to buy Facebook stock? The fees are more justifiable for smaller and lesser-known companies that require real selling – and when bankers actually help with addressing key investor concerns and winning more interest in the company. Back in the day banks used to take on substantial risk themselves by buying the shares first and then re-selling them (“firm commitment”), which they used to justify higher fees. But this is less common now, so there’s certainly downward pressure on fees. Will You Be Buying FB Shares? I’m staying away because great companies don’t necessarily make for great investments. Also, IPOs have historically under-performed the market by 2-3% – not a great sign if you’re going by statistics. Of course, by the time you read this the share price will probably have “popped” to a much higher number and I’ll look silly for not having invested. But we’ll see where things stand after a month, 6 months, or a year. And if you decide to invest, let us know how it goes and what price you get in (and out?) at. Nicole Lee has worked in institutional sales, private banking, and investment banking in Hong Kong. When she’s not working, she enjoys kiteboarding at exotic beaches, jumping off planes and bridges, and shark-diving. |