This year has been lackluster for Wall Street bankers. But next year, there’s Facebook Inc.

Up for grabs is the lead investment-banking role in the social-networking site’s initial public offering, and long-time rivals Goldman Sachs Group Inc. and Morgan Stanley are considered front-runners, bankers and venture capitalists say.

The Menlo Park, Calif., company plans to file its offering documents in early 2012, a person familiar with the matter has said, meaning that a decision on bankers could be soon. Some bankers have been waiting by the phone over the holidays for the call that they will be participating in the company’s IPO in some way, another person said.

As they gear up for the offering, Facebook executives have held a new round of meetings since Thanksgiving with Wall Street firms, according to people familiar with the situation.

The deal will be one of the most hotly contested offerings of the decade, with hundreds of millions of dollars in potential fees and bragging rights on the line.

Facebook’s stock sale could be as big as $10 billion, valuing the company at $100 billion or more. Fees for IPOs of that size have averaged 2.2%, according to Dealogic, which tracks new issues. That would mean a possible total payoff of as much as $220 million, though the company could negotiate lower fees because the Facebook deal is such a trophy.

Goldman and Morgan face stiff competition from rival investment banks vying for the prize of becoming the lead manager. Still, both are seen as having a leg up on competitors, even though each has possible knocks against them.

Goldman orchestrated a $1.5 billion private offering of Facebook shares in January, indicating a value for the company of $50 billion. Morgan Stanley is the leading bank for Internet IPOs this year, both in the U.S. and world-wide.

Goldman was seen initially as a shoo-in for leading the offering. But the New York company has had to prove itself anew to Facebook in the wake of a flub 11 months ago. Goldman had to restructure a private-placement deal that nearly ran afoul of U.S. securities laws that restrict advertising of private placements. Goldman solved the problem by limiting the offering to non-U.S. investors, but executives at the social-networking company became less enamored with the bank, according to people familiar with the matter.

Goldman Chairman and Chief Executive Lloyd C. Blankfein went to woo at least one Facebook board member earlier this fall, according to people familiar with the matter.

Meanwhile, Morgan Stanley recently held the coveted “lead left” role in the IPO of games site Zynga Inc. The “lead left” bank sees its name in the top left spot on the front page of the IPO prospectus. This “lead of the leads” status imbues the bank with the most authority on a deal, but also subjects that firm to the most criticism if things go awry in an offering.

Zynga shares have mostly traded below their offering price since the IPO, which some bankers have said could hurt Morgan Stanley’s chances in winning the Facebook deal.

Goldman and Morgan Stanley are running neck-and-neck for the title of No. 1 in underwriting the most U.S.-listed IPOs for 2011, according to Dealogic.

Representatives for Goldman, Morgan Stanley and Facebook declined to comment.

The prize role on Facebook could put the winner ahead of competitors in an area that has proven to be one of Wall Street’s bright spots amid relentless pressure on profits.

Bankers who advise corporations on mergers and financing have regained some dominance within their Wall Street firms this year as trading businesses suffered. Traders have been hurt by jittery investors and new rules intended to curb risk-taking with a firm’s own capital. The Facebook deal could give the winning bankers even more power.

At Goldman, fixed-income trading revenue fell 37% in the first nine months of 2011 compared to a year earlier, while investment-banking revenue rose 6%. Morgan Stanley has been trying to expand its nontrading businesses, particularly its wealth-management business.

Even if Goldman loses top billing in the Facebook deal, it will still win. The reason: If Facebook is valued at $100 billion, Goldman would double the value of its own stake in the company, giving it an instant $375 million profit.

As part of Goldman’s fund raising of $1.5 billion for Facebook in January, the securities firm bought what was then slightly less than 1% of the social-network company for $375 million. Goldman has a history of investing its own money alongside that of clients.

In addition, Goldman will make nearly another $100 million on fees that clients paid the firm to invest in Facebook through a private fund in January. On about $1 billion invested in the Facebook fund by Goldman’s non-U.S. clients, Goldman charged a 0.5% fee on any capital investors committed for expenses, a 4% placement fee plus a 5% fee on any gains in the fund if investors cash out.

If Facebook goes public with a stock-market value of $100 billion, that would add up to about $95 million in fees, depending on whether investors cash out after the IPO.

wsj.com