Morgan Stanley Banker's Side Gig Could Help Firm Land Highly Coveted Role on Uber IPO
October 18 2018 - 4:59AM
Dow Jones News
By Maureen Farrell and Liz Hoffman
Many Uber drivers are in it for a few extra bucks. Michael
Grimes has a bigger prize in mind.
Mr. Grimes, Morgan Stanley's top technology banker, has
moonlighted for years as a driver for the ride-hailing service,
according to people familiar with the matter. That side hustle --
hardly necessary, given his multimillion-dollar Wall Street salary
-- may help Morgan Stanley win a role on the most hotly anticipated
stock-market debut in years.
Valuing the nine-year-old company at as much as $120 billion, an
Uber IPO would reward investment bankers with tens of millions of
dollars in fees and equally valuable bragging rights.
Morgan Stanley and Goldman Sachs Group Inc. recently gave
presentations to Uber outlining an IPO that could launch in early
2019, The Wall Street Journal reported Tuesday. Some people briefed
on the matter say Morgan Stanley is the odds-on favorite to land
the coveted role of top underwriter, which carries higher fees and
prestige.
Investment banks compete fiercely in Silicon Valley, where
Morgan Stanley has been the No. 1 underwriter for U.S.-listed tech
IPOs in four of the past five years, according to Dealogic. It is a
boom-and-bust business, surging when the market is hot -- like it
is now -- and moribund when investor enthusiasm cools.
But picking winners and landing the choicest assignments is
never easy. While Uber co-founder Travis Kalanick was CEO, the
company told banks that working for competing ride-share services
would lock them out of dealings with Uber, according to people
familiar with the matter.
The stakes are now higher than ever. After a slow stretch in
which many flush startups preferred to stay private, the IPO market
is booming.
Global tech companies have sold $123 billion in shares so far
this year, versus $84 billion at the same point in 2017, according
to Dealogic. Stock-underwriting fees rose a combined 40% at
Goldman, Morgan Stanley and JPMorgan Chase & Co. through the
first nine months of this year.
Dropbox Inc., Eventbrite Inc. and Spotify Technology AG are
among many high-profile companies to go public. The biggest
launches are still to come: Uber, Lyft Inc., Pinterest and Airbnb
Inc. are all eyeing IPOs in 2019 or 2020.
For Wall Street banks eager to cash in on the offerings, the
preparations started years ago.
Goldman backed Uber early. It invested in the company in 2011 at
a roughly $200 million valuation, gaining a stake that could turn a
billion-dollar profit in an eventual IPO, people familiar with the
matter have said. Goldman in 2015 sold to clients of its private
bank bonds that convert into Uber shares at a discount to the
company's eventual IPO price. Gary Cohn, the bank's longtime No. 2
executive, was a frequent visitor to Uber's San Francisco
headquarters and became close to Mr. Kalanick, who said of Goldman
in 2015, "we're big fans of those guys."
At a conservative estimate of $1 billion, the profits from its
Uber investment would amount to 10% of Goldman's annual pretax
profits and could put the bank in an uncomfortable position if it
is seen as steering a deal that would result in a personal
windfall.
Morgan Stanley has wooed Uber for years. When the bank
authorized Uber rides for its employees traveling on business in
2014, it marked the occasion with a press release. In 2016, it
arranged a $1.5 billion loan for Uber, the company's first major
borrowing and one of the first times a money-losing tech startup
had tapped the debt markets.
The same year, Morgan Stanley raised hundreds of millions from
its wealthy clients to invest in Uber, despite the fact that the
company was unwilling to provide key financial information. The
bank currently is the lead arranger of a $1.5 billion Uber bond
sale.
As the IPO looms, Mr. Grimes took center stage. A fast-talking
California native with a degree in computer science, he is known to
put on a show for clients.
Nearly a year ahead of Snap Inc.'s IPO, he rented an apartment
blocks from the Snapchat parent's Venice, Calif., office. When
Morgan Stanley pitched music-streaming service Pandora Media Inc.
on going public, Mr. Grimes had his bankers wear T-shirts from
their favorite rock concerts.
He is known for being obsessive, even controlling, on the hunt
for a deal. Before presenting to Pandora's board, Mr. Grimes spent
weeks studying his daughter's usage of the website and chose the
color of the paper his team's pitch was printed on, a person
present at the proposal said.
When seeking a lead role for Morgan Stanley on Facebook Inc.'s
2012 IPO, he insisted on being the "single driver" of the deal,
arguing that having a sole bank in charge simplifies the
process.
Anupreeta Das and Greg Bensinger contributed to this
article.
Write to Maureen Farrell at maureen.farrell@wsj.com and Liz
Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
October 18, 2018 05:44 ET (09:44 GMT)
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