This week's big securities-industry merger announcement has Wall Street abuzz over the possibility that Goldman, Sachs & Co. will respond by finally going public.
Observers Thursday were wondering aloud what Goldman-the largest remaining securities firm still run as a private partnership-would do to answer the competitive challenge posed by the planned combination of its main rival, Morgan Stanley & Co., and retail giant Dean Witter, Discover & Co.
While most say that an acquisition of a retail brokerage firm would be out of character for the 129-year-old Goldman, some said that the new competitive challenge might be enough to push the investment bank into the public market.
"One of the issues to address right now is that the capital is at risk in a market downturn; the partnership shares could be yanked out in a huge departure," said one market source.
Goldman's management has faced the question of going public for a long time now, and a source familiar with the company said it keeps an updated S-1 form on file, which would enable it to register to sell stock on short notice.
With brokerage stocks at an all-time high, and financial stocks outperforming the market, analysts said this is a good time for an investment bank to go public. "Such a tremendous franchise would be a widely anticipated IPO in any market," said Mitchell Whiteford, principal in capital markets at Robertson, Stephens.
Goldman's chairman, Jon Corzine, told Financial Times that the firm was evaluating the Morgan Stanley-Dean Witter combination. "One would be remiss if one did not think carefully about how consolidation of this sort affects us," he said. "But we have a very cohesive plan and culture that is successful today, and will be successful going forward."
A spokesman for the firm declined to comment on speculation about a public offering. Goldman's most recent filings indicate it has about $5 billion in partner capital. In the past, Goldman has responded to pressure on its capital base by turning to institutional investors for infusions. In 1994, as the bond market soured, the Bishop Estate infused $250 million into the limited partnership.
Goldman was the top equity underwriter in 1996. It also led in initial public offerings, followed by Morgan Stanley and Merrill Lynch.
In merger and acquisition assignments, Morgan Stanley had the most deals; Goldman was second, and Merrill was third.
In overall common stock underwriting, Goldman was first with $16.6 billion. In total debt and equity, Goldman ranked third, behind Merrill and Lehman Brothers, according to Securities Data Co.
