Flotation would value Goldman Sachs at $10bn
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Your support makes all the difference.Goldman Sachs will be valued at $10bn (pounds 6.5bn) if it decides to abandon its status as Wall Street's most celebrated private partnership and go public. This value would represent a premium of at least twice its estimated book value.
There is now a broad expectation among analysts in New York that the 127-year-old firm will opt to sell shares to the public for the first time next year. The speculation has been fuelled by a sharp recovery in profits this year and comments yesterday from its chairman, Jon Corzine, implying that a sale was at least under consideration.
"Based on what I've seen in the last couple of weeks, I think it is likely to happen next year," remarked Perrin Long, a veteran Wall Street observer at Brown Brothers Harriman. "It would be the end of an era."
Goldman Sachs, whose partners would stand to receive huge financial benefits from a flotation, has considered going public no fewer than five times in 25 years. In 1986, the firm's management committee voted in favour of a sale, but it fell foul of disagreements between its then partners.
Mr Long was among analysts suggesting that a premium of twice net worth or even more is a realistic aim for the company, given the recent strong demand for brokerage house stocks on Wall Street. "What people will be buying is the name and the prestige."
Earlier this week, it emerged that the partnership earned $1.37bn before taxes for its latest fiscal year, a dramatic improvement on 1994 when it registered earnings of $508m. Bonuses of up to $1m have also been distributed this month.
Partners will also have been encouraged by the successful recent flotation of Donaldson, Lufkin & Jenrette, another Wall Street brokerage, that was able to sell 20 per cent of its shares at 1.5 times book value.
Talking to the Financial Times, Mr Corzine confirmed that a flotation was indeed under consideration. "I would like the partners to have a chance to think about this and be fully informed," he said.
Some analysts believe that partners in the firm are still divided into two camps on the issue. Those in favour of a flotation will be eyeing the benefits of their holdings in the firm being made instantly more liquid. An opposing coalition of partners is reported to be arguing that the firm can best maintain its prestige and success by retaining its private standing.
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