Goldman Shares Poised to Jump; $72 1/2-$78 Range Seen (Update3) |
May 4, 1999, 7:08 a.m. PT
Goldman Shares Poised to Jump; $72 1/2-$78 Range Seen (Update3)
(Updates price range indication.)
New York, May 4 (Bloomberg) -- Goldman Sachs Group Inc.shares were indicated to open at between $72 1/2 and $78 a share,as much as a 47 percent premium over the price at yesterday's initial public offering, according to traders and Bloomberg analytics.
The 130-year-old firm yesterday sold 69 million shares at $53 each, raising $3.66 billion. Demand for the 14.8 percent stake exceeded the number of shares offered by at least 10 times,and most shares went to Goldman institutional clients and some of its wealthiest private investors.
The indicated opening price range is based on initial bids and offer prices of traders. The stock was expected to rise on buying by investors who weren't able to get shares yesterday.
''There is a lot of pent-up demand that is going to chase it up,'' said Jim Blech, a money manager at Colonial Asset Management in Jacksonville, Florida.
Most shares in the offering went to Goldman institutional clients and some of its wealthiest private investors.
The stock will jump today, investors and analysts said, boosted by buyers who weren't able to get their hands on any yesterday.
Tom Bastian, senior equity research analyst at Banc One Investment Advisors in Columbus, Ohio, which manages $100 billion, said Goldman was ''smart'' to price the shares just below the $45-to-$55 initial projected range, allowing for a rise on the first day.
Goldman Sachs, founded in 1869 by Marcus Goldman, a German immigrant and former retailer, opted to become public after rejecting share sales over the last 30 years. It now has stock to make acquisitions and pay employees, and it has permanent capital that can't be depleted when partners quit or retire.
At $53, the firm sold its stock for 15.4 times estimated 1999 earnings of $3.45 a share, the average estimate of 12 brokerage firms that helped underwrite the IPO.
Rival Merrill yesterday traded at 17 times its estimated 1999 profit of $5.14 a share; Morgan Stanley fetched 17.45 times its 1999 forecast earnings of $6.01 a share.
''We were looking for it to be attractively priced, and it was,'' said Paul Stocking, an equity analyst at American Express Financial Advisors in Minneapolis, which bought the shares.
''They brought it out at a discount to its competitors -- a 3 to 11 percent discount in terms of 1999 earnings.''
Buyers of Goldman stock, which will trade under the symbol ''GS,'' will get a company that consistently ranks among the top investment banks in number and size of stock and bond underwritings and in advising on mergers. It earned a record $1.2 billion in its first quarter.
''There are going to be a lot of people who want to get some of those shares'' today, said Nick Roe-Ely, who runs the U.S. investment unit at Liverpool, U.K.-based Tilney Investment Management, which manages about $7.5 billion of securities.
Goldman sold 9 million shares more than the 42 million it had planned to sell for itself. The 51 million shares it sold brought in $2.7 billion for the firm. Two of the firm's limited partners, Japan's Sumitomo Bank and Hawaiian education trust Kamehameha Schools/Bishop Estate, raised a total of $954 million by selling 9 million shares each.
In all, the amount raised by the initial public offering was second only to Conoco Inc.'s sale of a 30 percent stake for $4.4 billion in October.
Goldman partners had voted to go public last June, only to postpone in September after a market plunge last summer cut most financial shares from record highs.
The stock market's gain this year has been paced by financial shares. The Standard & Poor's Index of investment banks and brokers rose 48 percent in the first quarter, the most of any industry group. In the last five sessions, that index fell 5.7 percent amid concerns about a strong economy, inflation and higher interest rates.