Morgan Stanley Learns from a 15-Year-Old

Morgan Stanley Learns from a 15-Year-Old

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Morgan Stanley recently made news by saying that it would soon allow its brokers to use LinkedIn and Twitter in their daily activities.  “We are the first major wealth management firm to announce a … solution for our Advisors to use key social networking sites to market themselves and share the firm’s intellectual content, while complying with regulatory requirements,” Andy Saperstein, Morgan Stanley Smith Barney’s Head of Wealth Management in the U.S. wrote in an internal memo. According to the memo, some 600 of the firm’s nearly 18,000 brokers will be part in this initiative by the end of this month. 

Morgan Stanley may finally be catching up to a 2009 research note written by a summer intern, saying that his generation doesn’t read newspapers or watch much television.  “Most teenagers are heavily active on a combination of social networking sites,” Matthew Robson wrote.  His research note, titled “How Teenagers Consume Media,” gained international recognition when it landed on the front page of the Financial Times,  – not because  it offered earth-shattering revelations but because its London-based author was only 15 years old.

It was “one one of the clearest and most thought-provoking insights we have seen,” Edward Hill-Wood, the Morgan Stanley analyst in charge of the media-research team, told the Financial Times, “At the vanguard of this digital revolution are teenagers. While their habits will obviously change (especially when they start employment), understanding their mindset seems an excellent way of assessing how the media landscape will evolve,” he wrote in his own note.

But even after years of studying social media, most high-powered, well-resourced research departments appear to have only a limited understanding of the value of companies in the booming social media industry.  Take the recent IPO of LinkedIn.  After much tweaking, LinkedIn’s underwriters priced the shares at $45. The next day, the stock opened at $83 and soared to $122.70 during intraday trading.  LinkedIn shares trade at around $80 today and many question why the underwriters underpriced the stock by so much. LinkedIn’s lead underwriter was Morgan Stanley.

One explanation is that many banks restrict employees’ use of social media at work, primarily due to concerns about regulatory compliance. As a result, the bankers involved in the IPO probably couldn’t truly appreciate the power of LinkedIn.

It now appears that Morgan Stanley doesn’t want to find itself behind the curve when Matthew Robson and his wired demographic start earning money and enter the market for a good investment advisor. Meanwhile, competitors are still toying with the idea of using social networking.

Morgan Stanley’s willingness to take risks in emerging technology could explain why it is landing major roles in many of the upcoming dotcom IPOs.  The bank is a lead underwriter for the Pandora IPOGroupon last week filed its registration statement for an IPO.  Its lead underwriter: Morgan Stanley.  Perhaps one day, we’ll see Morgan Stanley Smith Barney offering trades at 50-percent-off via Groupon.