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Silicon Valley Is Allergic to Slicked-Back Hair

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Word from within the Times is that Sorkin’s sources may have included Goldman’s competitors, but they didn’t deliberately plant the whole story. Regardless, those rivals can’t have been unhappy about the way things turned out.

9. Wall Street will blink.
When it came time to move forward with the IPO, instead of asking Wall Street for advice, Ebersman told Wall Street what he wanted. In February, he called his underwriters, telling them what role Facebook was offering and under what terms. “We knew the spread would be terrible,” one banker recently said of the fees Facebook is paying, “and it is terrible.” On a small IPO, the standard cut is 7 percent. For its IPO, Facebook made it about one percent. But one percent of a deal the size of Facebook’s could still add up to plenty of money, depending on how big the IPO ends up being—and Ebersman knew the banks would be in no position to balk. He was right.

10. IPO bankers don’t only care about fees. They also care about typesetting.
In Wall Street arcana, a pre-IPO company’s primary banker is known as the “left lead.” The designation is literal: Its name appears first on the prospectus, printed on the left side. This bank—Morgan Stanley, in Facebook’s case—manages the IPO process and sets the initial share price. The names of the other primary underwriters, meanwhile, appear on the right. Although these joint-lead positions also confer significant status and fees, they are, crucially, subordinate. Being “to the right”—being Goldman, which wound up in the third spot, behind JPMorgan—makes it plain that you lost.

11. Really, though, no bank won this one.
After the news broke on February 1 that Morgan Stanley had won the lead underwriting spot, talk circulated of how its bankers were bragging about the way they’d wowed Facebook. But a banker from another firm says it was obvious who held the real power. “However dazzling and indispensable we Wall Street guys think we are,” he said, “Facebook knew what they were doing.”


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