Morgan Stanley and Goldman Sachs have long dominated the technology IPO world, with one of them winning the lead spot on almost all of the past decade's biggest offerings. That list includes Facebook, Twitter, Snap and Dropbox.
J.P. Morgan Chase has been a persistent number three. For the largest U.S. bank by assets, that's no longer good enough.
Heading into what's expected to be a blockbuster year for tech IPOs, with Airbnb, Uber, Lyft and Pinterest all potentially on the 2019 docket, J.P. Morgan has a mandate from on high to break up the Morgan Stanley-Goldman duopoly and start nabbing its share of deals.
"We've made huge progress in Silicon Valley," J.P. Morgan CEO Jamie Dimon told a small group of reporters last week at a roundtable discussion in Silicon Valley, where he was surrounded by some of his top bankers in the region.
The bank is aggressively pitching venture capitalists across the Bay Area. One of its main points is detailed on a slide showing that IPOs perform better when J.P. Morgan is at least the co-lead, according to investors who have seen the data but asked not to be named because the discussions were private.
J.P. Morgan is also hiring commercial bankers to service venture-backed startups, specifically those with direct-to-consumer business models, in ways that have typically been left to smaller, more niche firms like Silicon Valley Bank. The strategy is to build relationships with start-ups as early as possible and outmaneuver Goldman and Morgan Stanley to become a tech company's go-to bank.
IPOs are typically underwritten by a number of firms, with each finding investors to buy the shares and then splitting the fees paid by the company. The top bank, recognized by the coveted "lead left" spot on the prospectus, does more of the work around pricing the deal. It also gets paid more than the other firms and positions itself favorably for future transactions after the company becomes public.