Facebook Gets Deal on IPO Fees

Company said to pay underwriters just 1.1%, about one-fifth the normal rate.

Facebook Inc., the social-networking website seeking to raise $5 billion in an initial public offering, will pay underwriters a 1.1 percent fee, two people with knowledge of the company’s plans said.

The fee will be shared among Facebook’s underwriters, said the people, who asked not to be named because the details are private. Facebook has hired 31 banks to manage the IPO, including Morgan Stanley as lead underwriter. The lead bank typically earns a bigger cut of the total.

At 1.1 percent, the company will be paying its banks about one-fifth the typical rate for IPOs. The sale would be the biggest offering on record for an Internet company and may value Facebook at $75 billion to $100 billion, people familiar with the situation have said.

Underwriters were paid an average of 5.48 percent in 127 offerings last year, Bloomberg data show. With larger IPOs, banks can often afford to take a smaller percentage fee, and high-profile offerings such as Facebook can lead to future business, making securities firms willing to accept less.

Jonathan Thaw, a spokesman for Facebook, declined to comment.

The banks Facebook named last month to handle the deal included Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Barclays Plc and Allen & Co. This month, Facebook expanded the list to include Deutsche Bank AG, Credit Suisse Group AG and Citigroup Inc. Smaller banks were added as well, such as M.R. Beal & Co., Muriel Siebert & Co. and William Blair & Co.

The role Mark Zuckerberg will play in marketing the offering hasn’t been determined, said a person with knowledge of the matter. The company’s 27-year-old co-founder and chief executive officer didn’t attend a meeting yesterday that served as a precursor to the IPO’s so-called roadshow, said the person, who asked not be identified as the matter is private.

That left Sheryl Sandberg, Facebook’s operating chief, and David Ebersman, the chief financial officer, to answer questions from analysts and bankers. The company, which held the event at its headquarters in Menlo Park, California, will probably have another meeting with analysts next month, the person said.

The company also hasn’t decided yet whether it will offer financial guidance to analysts, according to the person. At the event, executives emphasized that the company is focused on the long term and well positioned for growth, the person said.

The Wall Street Journal previously reported on Zuckerberg missing the analyst meeting. Executives at the event said he would be focused more on developing Facebook’s service, the Journal reported.


Bloomberg News


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