Morgan Stanley just beat JPMorgan Chase & Co. and Goldman Sachs Group Inc. for a second straight year in one of Wall Street’s most competitive businesses — and it’s poised to win again in 2019. Its secret: Quirky dealmakers wielding a spigot of private money.
The bank is the world’s top stock underwriter, a title that in recent years has shifted between JPMorgan, Goldman and Bank of America Corp., until Morgan Stanley narrowly claimed it in 2017, according to data compiled by Bloomberg.
In coming weeks, Morgan Stanley is set to handle one of this year’s marquee deals, the initial public offering for Uber Technologies Inc., making it even harder for competitors to catch up.
While the firm’s success in 2018 was fueled in part by stock sales for companies abroad, including in Asia, the rainmaker to watch this year is Michael Grimes, who’s based in Silicon Valley as co-head of the bank’s technology franchise.
He and colleagues have been tending relationships with a slew of big tech firms heading to market, such as Palantir Technologies Inc., by helping the ventures tap into the bank’s wealthy clientele and sovereign wealth funds for funding, giving their businesses more time to mature before going public.
“As many of the unicorns are staying private longer, they’ve got more rounds of private financing,” said Jay Ritter, a professor at University of Florida’s Warrington College of Business. That gives an advantage to Morgan Stanley, which has arranged much of that funding, he said.
Grimes is a colorful personality on Wall Street. A computer science and electrical engineering major, he has a renowned penchant for the gadgets and apps produced by companies he’s in charge of wooing.
On the road, he relies on Airbnb Inc. to book accommodations and rent out his house, according to people familiar with his technique. Before leading Zynga Inc.’s IPO in 2011, he mastered its “CityVille” game on his phone.
While pitching Ancestry.com, he showed the company an elaborate family tree he and his mother created together. For Uber, he moonlighted as a driver.
That helped Morgan Stanley rank No. 1 last year as lead underwriter by volume of global tech IPOs, according to data compiled by Bloomberg. And it positions the bank well for the coming year, when more so-called tech unicorns are expected to go public.
Yet Grimes’s strategy doesn’t always lead to landing the deal. Grimes became an avid reviewer on Yelp Inc. before its IPO in 2012, a person familiar with the situation said. Yet Goldman Sachs ultimately won the mandate.
One person who’s worked closely with his team, discussing strategy on condition of anonymity, described such engagement as the group’s secret sauce: Grimes and other bankers obsess over how startups and their services operate, then use that knowledge to impress the venture’s executives.
“He works hard to ensure he can see and understand the world through the lens of his customers,” said Mary Meeker, the famed venture capitalist, who previously worked as an analyst at Morgan Stanley and has known Grimes for more than two decades.
All bankers aspire to do that — though not always by going to such lengths.
Yet Grimes and his colleagues, many of whom have worked as bankers for 20 to 30 years, have another asset that’s even harder to mimic: The firm helps raise money for young companies in private markets, often tapping high-net-worth clients in its $2.5 trillion wealth management unit.