How Alibaba Group Holding Ltd (BABA) Favored Morgan Stanley (MS) Over Goldman Sachs Group Inc (GS) and JPMorgan Chase & Co. (JPM)?


Alibaba Group Holding Ltd (NYSE:BABA) recently handed the payouts to the six investment banks that were responsible for its spectacular debut in the US stock market. Apart from paying a base fee Alibaba Group Holding Ltd (NYSE:BABA) also paid an incentive fee to the banks that it had hired to run its offering. The Wall Street Journal reported today on how Alibaba Group Holding Ltd (NYSE:BABA) paid Morgan Stanley (NYSE:MS) and Credit Suisse the largest chunk of the combined fees.


Alibaba Group Holding Ltd (NYSE:BABA) had designated a $250 million fee pool to pay the investment banks for their work in handling the company’s IPO, this $250million fee was divided nearly equally among the top 5 banks that handled the IPO. Apart From this $250 million base fee pool, there was also a $50 million incentive that was to be distributed among the banks if the company debuted with the strong gains on its IPO day. Alibaba Group Holding Ltd (NYSE:BABA) shares rose spectacularly on its IPO day and Morgan Stanley (NYSE:MS) and Credit Suisse pocketed the largest chunk of this incentive fee, 22.5% or $11.3 million each.

The other two American investment banks, Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM) received 18% each of the base fee, which comes to around $47 million. According to the report, the banks were paid according to the work they did in IPO. Morgan Stanley (NYSE:MS) and Credit Suisse were the ones which were responsible for the most important aspects of this IPO hence were also awarded with a larger share of the fees. The Alibaba Group Holding Ltd (NYSE:BABA) fee pool at 1.2% of the offering was the highest IPO fee paid in History.

As of June 30, 2014, Boykin Curry‘s Eagle Capital Management owns over 28 million shares of Morgan Stanley (NYSE:MS); Warren Buffett‘s Berkshire Hathaway owns over 12 million shares of Goldman Sachs Group Inc (NYSE:GS); and Ken Fisher‘s Fisher Asset Management owns over 12 million shares of JPMorgan Chase & Co. (NYSE:JPM).

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