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.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: banco$ who wrote (20012)	9/28/1998 8:46:00 PM
From: Alex	Read Replies (1) \| Respond to of 116768

Goldman Sachs Cancels IPO as Financial Shares Plunge (Update1) Bloomberg News September 28, 1998, 4:36 p.m. PT Goldman Sachs Cancels IPO as Financial Shares Plunge (Update1) (Updates with 2nd section.) New York, Sept. 28 (Bloomberg) -- Goldman Sachs Group LP, blaming a bear market in shares of bank and securities firm stocks, canceled an initial public offering that just two months ago was expected to give the investment bank a $30 billion market value. Executives of the biggest and richest investment banking partnership ''decided today to withdraw'' the plan for the initial public offering ''after giving full consideration to the volatile state of the global financial markets and the disproportionately negative impact on the financial services sector.'' Since June, when Goldman's executive committee decided to go public, shares of rivals such as Merrill Lynch & Co. and Morgan Stanley Dean Witter & Co. fell as much as 40 percent, Goldman's third-quarter pretax profits dropped 19 percent and Standard & Poor's Corp. cut its outlook for Goldman's credit rating to ''negative'' from ''stable.'' The 129-year-old firm, after rejecting going public seven times in the last 30 years, decided it needed shares to pay for acquisitions and compensate employees. An IPO also would have made partners richer, with some holding stakes in the company worth more than $100 million. Then, Russia's default and ruble devaluation sent global markets tumbling, causing hundreds of millions of dollars in trading losses for securities firms and erasing more than $200 billion from the market values of U.S. financial companies. Goldman partners began talking about postponing the IPO earlier this month. ''You don't unveil your Rembrandts when the art market has fallen by 40 percent,'' said Donald Coxe, chief strategist for Chicago-based Harris Investment Management, which owns brokerage shares including Morgan Stanley Dean Witter. ''Given what's happened to brokerage stocks, there was no way this was going to fly.'' Goldman said it will elect a new group of partners next month. Its executive committee ''may propose a new plan'' for an IPO ''when markets and other conditions improve,'' Co-Chief Executives Jon Corzine and Henry Paulson said in a statement. Any new plan would require approval from the firm's 189 partners. Being private in a bear market for financial stocks may hold some advantages for Goldman. The firm doesn't have to disclose its profits or reveal trading losses, unlike public companies. With $6.6 billion in equity capital as of May 31, the firm is one of the world's biggest investment banks. ''When you've been private this long, you don't go public at anything else than a super valuation,'' said Coxe, who helps manage $12.5 billion in assets. No IPOs Investors' appetite for IPOs vanished as stocks fell. Sales of new stocks totaled $5.3 billion so far in the third quarter, down 60 percent from the second quarter, according to Securities Data Co. That contributed to a slump in underwriting profits for many securities firms. ''An increasingly difficult environment'' drove third-quarter pretax profits down to $754 million from $932 million in the year-earlier period, Goldman Chief Financial Officer John Thain said last week. Goldman also said it doesn't expect much improvement in the fourth-quarter. The firm is putting more of its capital at risk now. It's joining 13 banks and investment banks pumping $3.6 billion into Long-Term Capital Management LP, a hedge fund that almost collapsed last week after $4 billion of trading losses. The investment, orchestrated by the Federal Reserve Bank of New York, will keep Long-Term Capital from suddenly flooding the market with about $90 billion in securities, further roiling prices. --Monique Wise and Lisa Kassenaar in the New York newsroom (212)