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 Goldman.com," 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
PROMOTED VIDEO
Arts and Entertainment
British musician Mark Ronson arrives for the UK premiere of the film 'Mortdecai'
music
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us