JP Morgan wants to lead tech IPOs vs Morgan Stanley and Goldman Sachs

Finance


J.P. Morgan’s strategy goes further than jockeying for lead left.

Namburi and Michael Millman, co-head of equity capital markets, also want to make more money for the bank when it’s second on an IPO. In pitching venture investors and later-stage start-ups, J.P. Morgan bankers are showing that when they work as the second bookrunner, alongside Goldman or Morgan Stanley, the stock does better following the IPO.

In such instances, the companies’ shares rose an average of 43 percent a week after the IPO and 48 percent over the next month, according to J.P. Morgan’s statistics. When Goldman and Morgan Stanley are the two bookrunners, shares rose 25 percent and 28 percent over those stretches, J.P. Morgan says.

J.P. Morgan is using that data to more aggressively push for equal economics when it co-leads a deal.

Typically, the lead left bank takes 50 percent or more of the total fees associated with underwriting an IPO, leaving the junior banks to split the rest. But J.P. Morgan has been demanding an equal or near-equal split when taking the second spot, telling potential clients that there are significant benefits to having two banks that are equally motivated on a deal rather than just one, according to people who have been pitched by the bank.

There have been 11 tech IPOs with equal economics in 2018, and J.P. Morgan has been involved in six of them — SolarWinds, Bloom Energy, Adyen, GreenSky, Ceridian and Cardlytics, according to the bank.

Those stocks have jumped about 30 percent on average in the first week and 51 percent in the first month of trading, according to a document that J.P. Morgan provided to potential clients and CNBC obtained. When deals don’t have equal economics, they trade up 27 percent in the first week and 26 percent in the initial month, the document says.



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