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Goldman to vote on IPO
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March 3, 1999: 6:04 p.m. ET
Monday's vote could transform Wall Street's last private investment bank
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NEW YORK (CNNfn) - In a move widely seen as a market bellwether, the partners of Goldman Sachs & Co. are expected to vote next week to take Wall Street's last big private partnership public, just five months after shelving an earlier IPO plan.
In September the firm postponed selling shares ahead of a global market plunge that stung profits at most investment banks.
Now, with the financial services sector in recovery, analysts expect the firm's partners to vote Monday to OK an IPO that will end 130 years of private partnership, enrich top employees and perhaps give Goldman the equity muscle to further consolidate the industry.
"When an industry recovers, it's not unusual to get companies that postponed their decisions to return to the market," said Jay Ritter, a University of Florida professor of finance who follows IPOs. "I think the conventional wisdom is they will go ahead with this."
If Goldman partners approve offering a 10-15 percent stake, it may not reach last fall's estimated $30 billion valuation because industry profits are still off peak, several analysts said.
"The consensus on the Street is that the current valuation won't be what they could have gotten last year," said David Menlow, president of IPO Financial Network.
But it could be close, ranking it among the largest IPOs in history.
Banks, brokers are back
The company was said to earn fiscal first quarter profits in excess of $1 billion, a sharp jump from the fourth quarter when earnings fell 81 percent.
While first quarter results aren't in for competitors like Merrill Lynch and Lehman Brothers, analysts say the sector is on its way back.
Reflecting this, stock in Merrill (MER) and Lehman (LEH), though still off last summer's highs, are well ahead of their October lows.
Consolidating industry
The sector has seen a string of mergers among its public companies. Morgan Stanley merged with Dean Witter to form Morgan Stanley Dean Witter & Co. (MWD). Salomon Brothers merged Smith Barney and then the combined firm merged with Citicorp to create Citigroup Inc. (C).Credit Suisse linked with First Boston to form Credit Suisse First Boston (CSFB).
J.P. Morgan (JPM), meanwhile, is perennially seen as a merger candidate.
With new-found equity, Goldman, of course, could enter the game.
In a statement, co-chairmen Jon S. Corzine and Henry M. Paulson Jr., alluded to just that. "We have recommended the firm become public ... to finance strategic acquisitions that we may elect to make in the future," they said.
With its huge underwriting business and tremendous capital base, Goldman theoretically could underwrite its own IPO. Analysts, however, say the firm likely will hire co-managers like Lehman and Merrill in order to obtain independent pricing.
If approved, the company said an offering would occur by early summer.
-- By staff writer Jake Ulick
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