Goldman shoots to 43% premium on first day

SHARES IN Goldman Sachs, the Wall Street investment bank, shot to a 43 per cent opening premium when trading began on the New York stock exchange yesterday.

The stock opened at $76, up $23 from the $53 price set ahead of dealings on Monday, as investors, particularly wealthy retail buyers who were excluded from the initial public offering, scrambled to lay their hands on stock in the aftermarket.

Analysts said that they had expected the shares to show a small opening premium, if only because of a shortage of stock, but nothing like the surge seen yesterday.

"This is," said Ray Soifer, at Brown Brothers Harriman. "This is all driven by supply and demand."

The huge premium came on what by recent standards was a disappointing day on Wall Street with the Dow Jones Industrials index falling back more than 50 points to 10,960 after Monday's record-breaking run, which took New York's benchmark index through 11,000 for the first time.

Yesterday's opening price sets a market value of $35bn on the firm, putting Goldman ahead of its rival Merrill Lynch, which weighs in at $31.3bn, but well behind Morgan Stanley Dean Witter - at $58bn still unassailably the biggest bulge-bracket firm.

On fundamentals, Goldman should have attracted a lower rating than Merrill because a higher proportion of its earnings come from less predictable trading activities.

The $76 a share opening value, means that the chief executive Hank Paulson, who sounded the opening bell at the New York Stock Exchange yesterday, enjoys a paper worth of more than $311m. The holdings of chief operating officers John Thornton and John Thain are worth some $230m apiece.

Goldman tried to float last year, only to pull the issue at the last minute in October after the stock markets crashed following the near collapse of Long-Term Capital Management, the hedge fund. This time the firm left nothing to chance.

Only 51 million shares out of a total of 340 million were offered to the public, most being distributed to partners and employees, who are prevented from selling their shares for anything up to five years.

Wall Street sources said that Goldman had been very selective in placing the stock and had deliberately withheld shares from investors they suspected would flip the stock out immediately into the market.

The firm had also been cautious about the pricing, setting the issue price near but not actually at the top of the $45-$55 range. At that price, the sale raised $2.7bn for the firm. Judging by yesterday's overwhelming demand, the firm could easily have got away with a price closer to $70.

Goldman Sachs was yesterday unabashed at having left so much of the gains on the table for the market. One of those involved in the IPO said yesterday: "This operation is not about raising capital but about going from a partnership to a publicly quoted company. The issue is not where the price is today but where it is three years from now."

Start your day with The Independent, sign up for daily news emails
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor