Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (399)	6/17/1998 6:02:00 PM
From: porcupine --''''>	Respond to of 1722

"Some Will Miss Out on Big Payday at Goldman, Sachs" (but not Abby :-) June 17, 1998 By JOSEPH KAHN Bankers call it "yesterday's trade" -- the one buy or sell order that might have made an easy million had it only been executed. For retired, resigned and might-have-been partners of Goldman, Sachs & Co., the announcement on Monday that the private investment bank would go public was the ultimate missed opportunity. Even the most junior of Goldman's 190 general partners, the young recruits who received the coveted brass ring at the last selection in 1996, are each likely to have a stake in the company valued at $50 million or more after Goldman issues stock. That figure tops what a general partner who spent a lifetime there received upon retirement as recently as a year ago, retired partners say. Some 36 partners left the firm, becoming "limited" in Goldman's parlance, after the company had a tough year in 1994. Many others have slid from Goldman's all-time-consuming embrace to teach, found boutique investment houses or, in the case of Robert Rubin, become treasury secretary. They missed payday. Though Goldman had considered going public many times before, its partnership will not sell out more than once, and only its current general partners have guaranteed ownership stakes. Jon Corzine and Henry Paulson Jr., Goldman's co-leaders, vow to spread shares generously in the new Goldman, whose market value is expected to reach as high as $30 billion. But the leaders' main targets are Goldman's nonpartner, front-line employees. Those who have retired, and certainly those who quit during the prime of their careers, do not expect to see big bonuses. Pity, for example, Jack Salzman. A highly rated equity analyst and former Goldman partner, he left the firm and became limited in December of last year to set up his own investment fund. Though he retains equity in the firm, it will be returned to him at close to its book value, while partners who stayed on six months longer will see their equity stakes increase threefold or fourfold. Salzman is not eager to discuss the issue. "I am very happy running my hedge fund, and I have absolutely nothing else to say," he said when reached by telephone. Another near miss is the company's respected stock-market strategist Abby Joseph Cohen. Ms. Cohen has consistently predicted a strongly rising stock market, making her advice -- and by extension, Goldman's advice -- the most lucrative on Wall Street. But Ms. Cohen is not a partner, and some at Goldman considered her a sure shot for partner this year -- if there were still partnerships to award. Ms. Cohen did not return calls to her office seeking comment. But colleagues at the firm expect that she will be among the most highly compensated of Goldman's managing directors when it comes to passing out stock. The 115 limited partners are another story. Some, including John Weinberg, a respected former chairman, opposed Goldman's decision to go public at a partners' meeting last weekend, though he himself led a similar drive to consider ending the partnership in 1986. Other limited partners supported the company's decision to sell stock, though they derive no major benefit from it. Goldman has yet to work out how to deal with limited partners. All of them have capital invested in Goldman in a form equivalent to preferred nonvoting stock. They receive fixed-interest payments, more like debt than equity. Unless new arrangements are made, limited partners will lose this investment opportunity. And a few of them, including some who spent their lives building Goldman into an investment-banking powerhouse, have voiced complaints that the firm has forgotten their contributions. Some limited partners who asked not to be identified by name said they had heard that Goldman was planning to force them to cash out on unfavorable terms or to convert their stakes to equity at a modest premium. Those concerns appear to have been put to rest. A group of 30 gathered at Goldman's Broad Street headquarters Tuesday morning and met with Corzine. Two interviewed afterward said their earlier fears were unfounded. A Goldman person who attended the session said the firm would seek ways to keep the limited partners, and their capital, involved with the firm even after it goes public. Copyright 1998 The New York Times Company