Goldman Sachs Is Lined Up to Bank Millions from Twitter’s IPO
It seems like every day that a new piece of data regarding Twitter’s (NYSE:TWTR) highly anticipated initial public offering is leaked. Some of it is useful — like speculation about when the company will begin to roadshow its financials with prospective investors (the last week of October, if unnamed sources who spoke to Bloomberg are correct) — while other information is more superficial, but interesting.
The latest bit of information to slip through the cracks falls into that latter category — not entirely irrelevant, but not necessarily at the core of the investment thesis that is developing around the company. Sources told Bloomberg that Twitter will pay bankers fees of about 3.25 percent on the more than $1 billion the company is expected to raise in its IPO.
For some context, these fees are actually higher than those paid by Facebook (NASDAQ:FB), which had its IPO managed by the same team of banks, though with a different one in charge.
Goldman Sachs (NYSE:GS) is the financial firm that is leading Twitter’s IPO, with support from JPMorgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS). Morgan Stanley led Facebook’s IPO, which paid a fee of 1.1 percent on its $16 billion offering.
Lead banks, as the primary underwriters of the offering, typically take a larger cut. Data compiled by Bloomberg show that banks have charged an average fee of 5.7 percent for IPO underwriting services in the U.S. this year to date. This is higher than the 4.3 percent paid on average in 2012.
While Goldman will certainly earn a profit from underwriting Twitter’s IPO, landing the deal itself is as much a boost to the firm’s reputation as anything. Goldman lost out for the lead role in both the Facebook and LinkedIn (NYSE:LNKD) IPOs.
Goldman’s Anthony Noto is handling the deal.