Bank of America, JPMorgan to benefit from GM IPO


Sometimes, you have to win a big deal just for the sake of winning a big deal--to prove to the world that you're the go-to guy, the top dog. When it comes to IPOs (IPO news) we've seen it before with the Google IPO. Recall that frenzied bake-off, which featured the disqualification of Goldman Sachs and the eventual triumph of Morgan Stanley and Credit Suisse First Boston. Recall also that Google insisted on a Dutch auction that ended up being quite onerous to set up. I do not think, however, that Morgan Stanley regrets being the lead in a massive offering.

Morgan Stanley finds itself in a similar situation. The media holds that it and JPMorgan Chase are now the front-runners to win the lead duties in the GM IPO. Bank of America may also be competitive, while Goldman Sachs is generally given little chance. But the government isn't willing to pay much; the underwriters will get about 1 percent of the proceeds. The historic standard that was 7 percent has come down. Still, 1 percent isn't a pittance.

Winning will be a big deal--bragging rights matter in the industry. The deal is expected before the end of the year. Perhaps the eventual underwriters can blame Lazard, which is advising on the deal. 

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