Massive demand for Goldman IPO

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The Independent Online
WALL STREET will be witness this morning to one of the largest and most-vaunted public offerings of its history - the listing of shares in Goldman Sachs Group, the venerable investment firm that will be bringing down the curtain on a 130-year tradition as a private partnership.

The shares are expected to be priced at the top end of estimates at $55 per share, valuing Goldman at $26bn (pounds 16bn).

The clamour for a slice of the firm has been overwhelming, and advance orders have exceeded 600 million shares. That is 10 times the 60 million actually put out for sale, about 14 per cent of the bank. Goldman is likely to sell an additional nine million shares because demand has been so strong.

If, as expected, the offering tops $3bn, it will go down as the second- largest initial public offering (IPO) ever on Wall Street, after the $3.9bn raised by oil giant Conoco in its initial offering.

Small investors looking to own Goldman are likely to be frustrated for now. The bank is believed to have allocated most of the available shares to institutional money managers and to its clients. "If you don't do a lot of business with them, you are not going to get any," one fund manager grumbled yesterday.

The rush for shares has been fuelled by the recent surge in equities in New York, where the Dow Jones industrial average is now flirting with the 11,000 mark. And until the last few trading sessions, shares in brokerage firms were also powering ahead.

Goldman should have gone to the market in September. However, the bank pulled its original IPO plans after the economic troubles in Russia and Asia sent stocks tumbling late last summer.

Goldman went on to have a disastrous quarter ending 30 November, with pre-tax profits sliding by 81 per cent.

Goldman, which has since regained its equilibrium, has promised to cut down on its riskiest business - the trading of its own profits - to reduce volatility. After the IPO it plans to reduce its reliance on trading from 45 per cent of revenues now to between 25 and 30 per cent.

One cloud over the party is an investigation by the Justice Department, made public late last week, into claims that Goldman and several of its competitors have been colluding to fix the rate of commission charged on IPOs they underwrite for other companies.

The news did little to dampen investor enthusiasm, however. "This place has been, is now, and will be in the future, a money machine," said Mark Dawson, a money manager for Rainier Investment in Seattle.

"No matter what happens in the next few days, you will come out ahead buying Goldman," said Mr Dawson.