In the weeks leading up to Facebook's massive $100 billion initial public offering, the company's founder Mark Zuckerberg reportedly told Goldman Sachs, Morgan Stanley, JPMorgan Chase and the other banks involved in the action to stop leaking information to the media.
Zuckerberg, who earns only $1 in salary from Facebook but retains a $28 billion stake in his social network, was reportedly unhappy that the banks leaked details about his company's Wall Street debut, including the Feb. 1 date it chose to file its S-1 paperwork with the Securities and Exchange Commission.
Facebook executives are also miffed about the subtle rivalry between Goldman Sachs and Morgan Stanley, which were jockeying to become the lead underwriter for the IPO, the largest since Google's $1.7 billion offering in 2004. Morgan Stanley reportedly won that fight, with Goldman Sachs taking the third undewriter spot.
The banks are heeding Zuckerberg's warning, urging their employees to keep quiet about Facebook's filing.
[Facebook] wants to be taken seriously and viewed as a blue-chip company, said one bank official close to the situation. The banker could not give his name because he is not authorized to make public statements.
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Zuckerberg did not make any threats, but the banks are wise to consider how disobeying Zuckerberg's wishes could mean getting dropped from one of the most lucrative IPOs in recent memory. The banks stand to make $40 million from their deals with Facebook, and they could make even more if other tech companies like Twitter decide to include them in their own IPOs.
In the coming weeks, Zuckerberg will work with his other two lead executives -- COO Sheryl Sandberg and CFO David Ebersman -- to discuss an appropriate valuation for Facebook. Underwriters hope to establish a fairly high offering, despite the risk factors associated with the world's largest social network. In its SEC filing, Facebook outlined 35 risk factors that could materially and adversely affect the company; the list reveals some troubling facts, including Facebook's lack of sustainability and its dependency on others to operate.
Facebook is preparing to raise $10 billion this year, which would raise its public value to $100 billion. Sandberg owns 1.9 million shares (0.1 percent), seed investor Peter Thiel owns 44.7 million shares (2.5 percent), co-founder Dustin Moskovitz owns 133.8 million shares (7.6 percent), and Zuckerberg is the biggest stakeholder in the company with 533.8 million shares (28.4 percent).