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(Bloomberg) – Michael Grimes, the whisperer on Wall Street in Silicon Valley, seemed to be heading for a win.
That was in 2012 and the humiliating debut of Facebook Inc. on the stock market was causing losses and lawsuits on the part of investors. That left Grimes – the architect of the bid and Morgan Stanley's first banker – hurt in the eyes of his competitors. Some pieces of his franchise, they thought, would soon be theirs.
In less than a year, it was clear that the Grimes team was holding on. And as a wave of tech start-ups in the US went to the initial public offering, this year it has won the largest market since Facebook: Uber Technologies Inc.
As the world knows now, Uber's big moment this month has not been at the rendezvous, at least for the small workers who had been waiting for a decade to gain a special place in the industry. giant horse. In fact, it's painful. The stock fell 18% in the first two trading days. Although it stabilized last week, it was still 7% lower than the original price of $ 45 on Friday. Shares lost an additional 3.7% to $ 40.35 at 9:46 am in New York.
Yet, in all respects, Grimes flies high. And this time, many in the business community predict privately that it will come out unscathed. Other people close to start-ups, probably will not fear the chaotic start of Uber, which he cultivates, like Airbnb Inc. Morgan Stanley maintains relations with legions of wealthy investors and an army of more 15,000 brokers capable of forming actions with the masses. For now, Grimes remains the banker to beat in Silicon Valley, an investor claiming that the only other comparable competitor is one of Goldman Sachs Inc.'s top technology bankers, Ryan Limaye. Both men were trained as engineers.
Venky Ganesan, a partner at Menlo Ventures, who supported Uber, defended Grimes as "one of the greatest bankers of his generation".
How Grimes, 52, Became the Banker in Teflon Technology Highlights a sobering truth about the game of IPOs: People inside can become extremely rich, even when many ordinary investors do not. After years of private financing that helped Uber postpone its IPO, Morgan Stanley's bankers have led nearly 30 securities firms to find buyers to raise an additional $ 8.1 billion, subsequent fluctuations in the stock markets.
It's more and more the life of retail investors at the bottom of the food chain. They are waiting to participate in the success of Silicon Valley. When the public list finally arrives, they tend to buy new shares at the most expensive price.
Indeed, they flocked to Uber. According to TD Ameritrade, transactions by individuals were unusually large the day Uber arrived on the market. It was one of the top five retail stores since Facebook.
These investors can still do very well in the long run. Witness of the first fall of Grimes with Facebook: the title had technical problems at the beginning of the negotiations, then it tipped in a slip of several months, losing half of its value. But in the end, he went back and is now worth almost five times his original price.
A spokeswoman for Morgan Stanley, based in New York, declined to comment.
"Speak their language"
Grimes won Uber's IPO with an argument that he was fluent in the same jargon as employees, according to people close to the file who asked not to be named to describe the interviews. Goldman Sachs, who started courting Uber executives several years ago and even bought a stake, was ranked second, followed by Bank of America Corp.
"You can put him in the room with Sundar or Satya or an unknown young founder, and he immediately speaks their language," said Jim Goetz, partner of venture capital firm Sequoia Capital, referring to Google's executives and from Microsoft Corp. "Most of the time, bankers are at the top of their finances, for Michael it's an afterthought, and it's a blessing in Silicon Valley."
The mandate adds to the pile of money that Morgan Stanley gathers links with Uber. The bank is expected to raise at least $ 41 million as the main underwriter of the IPO. The regulatory filings show that the company had already collected fees to raise private funds, for example by selling shares to wealthy clients in 2016.
All of this shows how important Morgan Stanley's money management business to investors is for the bank's transaction agents.
"Morgan Stanley's strong wealth management business gives them a significant competitive advantage over rivals like Goldman when they launch IPOs," says Tim Loughran, a professor at the University of Notre Dame, who said studied the offers of titles.
Nevertheless, the practice is a "double-edged sword," he said. "A big problem could arise for Morgan Stanley if investors in publicly traded shares after pushing the stock towards their unsuspecting wealth management clients. I am confident that investors who bought shares as part of the Uber IPO at $ 45 are disappointed. "
There are also the unusual habits of Grimes and his court strategies, which have earned him a certain character in the industry. Specialist in computer science and electrical engineering, he is known to make considerable efforts to understand the gadgets and applications produced by companies he regrets.
In 2009, when he successfully managed the Ancestry.com IPO, he showed the leaders a family tree he had created with his mother. Prior to leading the Zynga Inc. IPO in 2011, he mastered his "CityVille" game on his phone. For Uber, he was driving. And when he travels, he relies on Airbnb to book accommodation and rent his house. Many expect the housing start-up to become public next year.
"He is really a technology expert," said Goetz of Sequoia.
Pointing fingers
As Uber began to crack, several senior investors and bankers competing on Wall Street privately pointed to Morgan Stanley and, by extension, Grimes. Others expressed sympathy, noting the market turmoil triggered by US-China trade negotiations, and the recent dismal results of Lyft Inc., Uber's smallest competitor,
Whatever the case may be, technical managers tend to focus more on the outcome of the company's publication. According to the bankers' opinion: yes, bankers Morgan Stanley and Goldman Sachs have privately announced a potential valuation of $ 120 billion for Uber last year, revealed to the public. But that's how the marketing machine works. Friday, Uber was worth $ 71 billion.
Grimes was already in the hot seat. Shareholder lawsuits flew after Facebook's IPO. The same year, Google found itself facing legal proceedings regarding its split project. Shareholders said the move, designed with help from Morgan Stanley, would have unfairly allowed the founders of the search engine to expand their control.
Since then, however, Grimes has increasingly played the public role of Morgan Stanley in Silicon Valley. While Goldman Sachs and JPMorgan Chase & Co. often send their CEOs or other senior executives to court clients, Grimes has the power to represent his bank himself from his Menlo Park base. He often participates in the same charitable events that attract the big names in technology.
Wall Street, for its part, already passes the IPO of Uber. Goldman Sachs and Morgan Stanley are among the banks expected to help Slack Technologies Inc. appear on the list in just a few weeks, making it the first high-profile company in the US to use this very unusual method since Spotify Technology last year. Other unicorns that are close to public markets include WeWork Cos. And Palantir Technologies Inc.
Grimes does not always win, of course. Morgan Stanley is the largest underwriter of technology IPOs this year, but Goldman's technical, multimedia and telecommunications team, led by Nick Giovanni and Pete Lyon, is currently the largest M & A advisor in the industry. , according to data compiled by Bloomberg.
And there is a risk that Morgan Stanley's investor clients will start to sit on the sidelines and suspect the company's bankers take them for granted. A big investor Uber had blamed the banks for setting the price of the IPO too high initially.
During the introductory tour leading up to Uber's IPO, subscribers gathered more than 100 institutional investors for an exclusive lunch at Manhattan's Mandarin Oriental Hotel, telling attendees the place shortly in advance for the meeting to remain exclusive.
An investor accustomed to such lands said that he was unusually crowded, hedge fund managers bumping into shoulders while they were sitting on folding chairs eating pasta. Grimes and the leaders spoke, but the investor said the answers to the questions were too anemic. Uber executives may have been pleased with the performance, but decided not to buy any shares.
(Updates the Uber actions in the fourth paragraph)
– With the help of Carolina Wilson, Eric Newcomer, Sarah McBride, Sridhar Natarajan, Olivia Carville, Lizette Chapman and Kurt Wagner.
To contact the reporter about this story: Sonali Basak in New York at [email protected]
To contact the editors in charge of this story: Michael J. Moore at [email protected], David Gillen at [email protected], David Scheer, Steve Dickson
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