Goldman-Led Twitter Underwriters to Make $59.2 Million From IPO

Goldman Sachs Group Inc. and other underwriters on Twitter Inc. (TWTR)'s initial public offering will share about $59.2 million for managing the sale after accepting one of the smallest fee rates for a U.S. IPO this year.

The projection is based on the 3.25 percent of the $1.82 billion IPO that Twitter agreed to pay the banks managing the sale, people familiar with the matter said last month. Goldman Sachs is leading Twitter's IPO, with help from firms including Morgan Stanley and JPMorgan Chase & Co., regulatory filings show. The fee pool is typically split unevenly among underwriters, with larger shares going to banks that are more actively involved in the process.

At that rate, Twitter's banker fees would reflect a smaller proportion than underwriters have received in nearly every U.S. initial offering this year, data compiled by Bloomberg show. While investment banks use fee income as a major measure of success in deal underwriting, firms are sometimes willing to take a smaller share of proceeds for high-profile sales that may generate future business.

"Goldman being the first name on the S-1 has little to do with fees," Max Wolff, chief economist and strategist at ZT Wealth, said by phone from New York. "This is about Goldman rebalancing itself as a serious leader and competing with Morgan Stanley's dominant position in technology."

San Francisco-based Twitter is still paying a higher rate than Facebook Inc., where underwriters collected about 1.1 percent of the $16 billion raised in May 2012. Excluding Twitter, U.S. IPOs overall have paid underwriters an average fee of 5.6 percent this year, according to data compiled by Bloomberg.

Valley Bankers

Twitter's IPO was led by some of the best-known investment bankers from Silicon Valley to Wall Street. Anthony Noto, the Goldman Sachs co-head of technology investment banking who led the offering, according to a person familiar with the matter, formerly served as the chief financial officer for the National Football League, a job he held until 2010.

Michael Grimes, Morgan Stanley's co-head of tech banking who helped helm the offering, according to another person, has led other high-profile Internet IPOs by Facebook and LinkedIn Corp. (LNKD) JPMorgan Vice Chairman Jimmy Lee managed the Twitter offering for that bank, a person said. The people asked not to be named because the information is private.

Twitter's IPO is the largest that Goldman Sachs has led for a U.S. technology or Internet company, data compiled by Bloomberg show. The offering is helping the investment bank bounce back after losing the prime spot on social-media IPOs from LinkedIn to Facebook. The lead-left role -- so named because of the way the bank names are printed on the offering prospectus -- is typically the most lucrative job for advisers in a stock offering.

Digital Media

JPMorgan's Lee worked with Liz Myers, the global head of equity capital markets, as well as Noah Wintroub, who heads Internet and digital media investment banking.

Twitter will start trading today, listed on the New York Stock Exchange under the symbol TWTR. At the IPO price, the company has a market value of about $14.2 billion.

Among the largest U.S. IPOs this year, only Plains GP Holdings LP (PAGP) paid a smaller percentage fee to its underwriters when it raised $2.91 billion in an October offering, including an over-allotment, data compiled by Bloomberg show. Banks led by Barclays Plc, Goldman Sachs and JPMorgan received a 3 percent share of the cash raised in that IPO, the data show.