Counterparties: Grimes and misdemeanors
Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
When Morgan Stanley won the lead role in Facebook’s IPO in February, its lead technology banker Michael Grimes insisted that he be the “single driver” of the deal. In exchange, he acknowledged that it would be “his throat to choke” if anything went wrong.
In the wake of Facebook’s botched IPO, however, it looks like Grimes doesn’t have to be worried about any retribution from his employer. Fortune’s Stephen Gandel reports that Morgan Stanley won’t use its stringent clawback rules “to take any disciplinary action against Grimes or any of the bankers involved in the Facebook IPO”. This despite the fact that Morgan Stanley has been fined $5 million by Massachusetts’s securities regulator for selectively disclosing financial information to research analysts, a tactic Grimes did “everything but make the phone calls himself” to execute.
Perhaps Grimes is keeping his pay because he did nothing wrong. Jonathan Weil says the settlement is “farcical”, and that Morgan Stanley should have let the case go to a jury: “even viewed in the worst possible light,” he writes, “none of the conduct described by Galvin was an obvious breach of anything.” Weil suspects that “the real crime here seems to be that Facebook’s stock price fell a lot after the company went public in May, which of course isn’t a crime at all.”
Grimes is also keeping his pay because even after the Facebook fiasco, he’s still the biggest rainmaker on the Street. Gandel reports that in the seven months since the Facebook IPO, Morgan Stanley has generated $32 million in fees from 14 technology IPOs; JP Morgan is a distant second, with just 5 deals to its name in the same period. Grimes’s throat was safe all along, it seems. Just so long as he kept on bringing in the deals. — Ben Walsh
And on to today’s links: