Oleg Zabluda's blog
Wednesday, May 23, 2012
 
Facebook IPO was at $38, went up to $42, and is now settled at $31.
Facebook IPO was at $38, went up to $42, and is now settled at $31.

Facebook raised $16G, and was driving hard bargain with the bankers, giving them only 1.1% in fees, or measly $170M [1].

Underwriter syndicate bought 421M shares from Facebook for $37.582 (=$16G) and sold them for $38 (+1.1% or $170M). However, the actually sold 484M (15% more) shares for $38.00, which would make them $202M, if the stock went up and they covered it with the Greenshoe option at $37.582 from the insiders, who then wouldn't have to wait for lock-up period to expire [2].

What's Greenshoe option? Glad you asked.

http://news.ycombinator.com/item?id=3996288
http://en.wikipedia.org/wiki/Greenshoe
http://dealbreaker.com/2012/05/company-sells-stock/
http://dealbreaker.com/2012/05/facebook-ipo-goes-nowhere-in-exciting-fashion/
http://dealbreaker.com/2012/05/this-is-a-post-about-greenshoes/
http://blogs.reuters.com/felix-salmon/2012/05/21/morgan-stanleys-2-4-billion-facebook-short/

http://www.bloomberg.com/news/2012-05-18/facebook-underwriters-to-split-about-176-million-in-ipo-fees.html

[1] Morgan Stanley 40% JPMorgan 20 percent, Goldman Sachs 15%, ...
[2] If the short position was covered at $31 instead of $38, as it likely have happened, the profit would be (484 - 421)*(38 - 31) = $441M. The reason not to do it is not to very publicly screw up the clients and the company during a high-profile IPO.
http://dealbreaker.com/2012/05/this-is-a-post-about-greenshoes/

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