This weekend's competition in Wisconsin is a bit more intense than it was in your grade school gym class.
Goldman Sachs Group Inc., on pace to be the top adviser on U.S. initial public offerings for the first time since 2009, scored a coup by landing the lead role on Twitter Inc.’s sale.
Twitter, which announced yesterday that it filed for an IPO, gave Goldman Sachs the job of running the sale, a person with knowledge of the matter said. While Twitter is likely to appoint other banks on the offering, the lead-left role — so named because of the way the bank names are printed on the offering prospectus — is typically the most lucrative job for advisers in a stock offering.
Goldman Sachs lost out to rival Morgan Stanley on similar roles in the highest-profile technology IPOs in recent years, including Facebook Inc.’s $16 billion sale last year and offerings by Groupon Inc. and Zynga Inc. the year before. San Francisco-based Twitter may have opted for Goldman Sachs after the other offerings drew criticism and complaints from shareholders, according to Michael Holland of Holland & Co.
“The Facebook experience was one that was so egregious that Twitter did a fairly predictable thing,” said Holland, who oversees more than $4 billion as chairman of the New York-based money manager. “When the biggest and best have needed IPO services, Goldman is always a finalist.”
Facebook, Zynga and Groupon each declined by more than half in the months following their offerings, data compiled by Bloomberg show. Disappointing performance by Facebook following its offering helped to freeze the U.S. IPO market for more than a month and led to shareholder complaints over the valuation of the offering.
Facebook eventually regained losses following its IPO, closing above its IPO price on Aug. 2. The shares fell 1.3 percent to $44.15 as of 11:14 a.m. in New York today, still above the $38 debut price.
“Twitter has studied the Facebook IPO experience in detail and doesn’t want a repeat,” said Francis Gaskins, president of Marina Del Rey, California-based researcher IPOdesktop.com.
This year, Morgan Stanley has led or won lead roles on at least four technology IPOs, data compiled by Bloomberg show. The bank managed a $219 million share sale for online coupon provider RetailMeNot Inc., including the over-allotment option. The IPO of Cvent Inc., the maker of event-management software which raised $135 million, was also Morgan Stanley-led.
Mary Claire Delaney, a New York based spokeswoman for Morgan Stanley, declined to comment, as did Goldman Sachs spokesman Michael DuVally. Jim Prosser, a spokesman for Twitter, also declined to comment.
Goldman Sachs led Tableau Software Inc.’s IPO in May, which raised $292 million including an over-allotment.
While Twitter hasn’t said how much it will seek to raise, New York-based Goldman Sachs could increase its lead over rivals if Twitter’s offering is completed this year. The bank is ranked first among advisers of U.S. IPOs with an estimated 11 percent share of the market so far this year, data compiled by Bloomberg show.
Goldman Sachs rose 0.5 percent to $164.19 a share today. Morgan Stanley was up 0.4 percent at $28.13.
Citigroup Inc. is ranked second in the U.S., while Morgan Stanley currently ranks in seventh place, the data show. Globally, Morgan Stanley has the largest share of the IPO underwriting market, with 8.3 percent, while Goldman Sachs is in fourth place.
New share sales have accelerated following gains in the broader stock market. There have been 124 U.S. IPOs this year, more in number than the comparable period of any year since 2007, data compiled by Bloomberg show.
Morgan Stanley, led in tech by Michael Grimes, and Goldman Sachs have long been rivals in Silicon Valley, vying to take the hottest companies public. Goldman Sachs’s technology team is led by George Lee and Anthony Noto, who returned to the bank in 2010 after a stint as the National Football League’s finance chief.
Goldman Sachs led the IPO this year for Envision Healthcare Holdings Inc., the hospital operator which raised $1.1 billion. The bank also led the IPO of single-family rental homeowner American Homes 4 Rent, which raised $812 million, and theme-park operator SeaWorld Entertainment Inc., which attracted $807 million from investors. The IPO proceeds all include over-allotment options.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
NPR, which co-produces this show with WBUR Boston, announced today that it will soon offer what it's calling a voluntary buyout plan to reduce staff by about 10 percent. In a message to the staff, CEO Gary Knell said NPR's board approved a budget for fiscal year 2014 that aims to eliminate an operating deficit and lower ongoing expenses. The network also announced today that former businessman Paul Haaga, the vice-president of the - the vice chair of the board, rather - will serve as acting president and CEO of NPR, replacing Gary Knell, who announced last month he is leaving to become the CEO of the National Geographic Society.
And now to Twitter. Nothing lights up Twitter like news about Twitter. Within moments of tweeting yesterday that it would go public, people responded. @KoolJeffrey tweeted: I'll buy no more than 140 shares. @dennisglasgow: Will #TwitterIPO trend forever? And @PKC1963 had this warning: Dear Twitter, examine closely the Facebook IPO and do the exact opposite. Marty Schenker of Bloomberg News joins us to discuss the Twitter IPO. And Marty, first of all, what about the way Twitter announced this? Pretty unusual.
MARTY SCHENKER: Yeah. It's pretty unusual. But when you think about it, Facebook announced its IPO on Facebook. So it's sort of logical that Twitter would announce it with a tweet. And that's what they did.
HOBSON: Well, Twitter is taking advantage of the new federal law that involves companies with revenues of less than $1 billion. Tell us about that law and how that's being used here.
SCHENKER: Well, that's commonly called the JOBS Act, which stands for Jumpstart Our Business Act. So it's really not about jobs, although it's attempt to create jobs. And under that act you can basically keep all your financials confidential up until 21 days before you actually come to market.
HOBSON: And how does that help Twitter?
SCHENKER: Well, it helps Twitter because they don't have to go through weeks of explaining their numbers. So that was what caused Facebook so many problems. When they filed their IPO, they gave financial information that people mulled over for weeks and questioned. And Twitter can avoid that.
HOBSON: So as you mentioned, Facebook is the thing that's in the back of everybody's mind here when they hear about another big social media company going public. You think Twitter is not going to have the same debacle as Facebook?
SCHENKER: Well, they - if they take the lessons of Facebook, they can certainly avoid them. And one of the things they need to do is make sure that they have a very good story to tell when the time comes of doing their, what's called a road show, when they go out to the investing public and try to explain how they're going to make money.
HOBSON: How might this change Twitter? Because of course one of the big concerns about companies going public is that they then have to answer to Wall Street investors and they might make decisions that have more to do with Wall Street than their customers.
SCHENKER: Well, it's an interesting question because that was the fear that Facebook faced. And Mark Zuckerberg, just the other day at a conference said, you know, he thinks doing the IPO was actually good. It imposed discipline on the company, and it was actually something beneficial to him.
HOBSON: And Marty, Hilton Worldwide Holdings also announcing it plans to go public. Is this the IPO season or what's going on right now?
SCHENKER: Well, you know, it certainly does seem that way. That's a company that was taken private before the market fell apart in 2007. And now they're going to make billions of dollars on that. Some people are concerned that taking IPOs public at this time is a sign of a market top, but it's certainly a good time.
HOBSON: Marty Schenker of Bloomberg News, thanks as always.
SCHENKER: You're welcome.
HOBSON: And coming up next, we will check in on those flashfloods in Colorado. Stay with us. HERE AND NOW. Transcript provided by NPR, Copyright NPR.