In the current chaos, lets say GS decided to take itself private.

September 18, 2008 4:41 PM

Lets say that one, (theoretically, of course) owned a relatively small amount of stock in Goldman Sachs, and had no intention of selling it...

In the current chaos, lets say GS decided to take itself private. How would that happen, and how would it impact small shareholders?

posted by R. Mutt to work & money (6 comments total)

Jesus Christ that's a bad answer in 9 different ways. Answer the freaking question.

Assuming the independent board members approve the transaction you would be given the opportunity to tender your shares. The deal would probably be contingent on the % of shares who choose to tender. You can choose to tender or not tender. Under US law though once a very high % of shares chooses to tender GS could choose to force the remaining shares to tender at the same price.
posted by JPD at 4:57 PM on September 18, 2008 [2 favorites]

this chart from April shows GS's assets as $135B/$620B/$96B.

Difficult to say if they will survive. Depends on whether this talk of the taxpayer bailout out the industry moves forward.

Anyhoo, to answer your question, GS would pay you for your shares, at some premium to the current market price.

The key question, though, is what that market price is. In its best years it was able to earn $15B+, but earning $15B on over one trillion of liabilities isn't much to write home about, especially when an unknown % of those liabilities aren't going to perform going forward.
posted by troy at 5:02 PM on September 18, 2008

Time to double down on this one.
posted by caddis at 5:07 PM on September 18, 2008

I don't know if GS has the same solvency problems that Bear Stearns, Lehman Bros, Merrill Lynch, and holy fuck am I really typing this list?

GS has termed out most of its debt, so it's a bit of a different scenario than Lehman and even MS. I am not your portfolio manager. I am not long GS.

In its best years it was able to earn $15B+, but earning $15B on over one trillion of liabilities isn't much to write home about, especially when an unknown % of those liabilities aren't going to perform going forward.

1.5% ROA is pretty good for a financial services company. With ~25x leverage, that's a great ROE. Did you just start following this industry last week?
posted by mullacc at 9:30 PM on September 18, 2008 [2 favorites]

^ pretty much . . .
posted by troy at 11:52 PM on September 18, 2008

ah, I get it now how leverage eats into the ROA return.

GS's got over $40B of retained earnings, uses that to lever up 25X and nets out 1.5% of returns over borrowing cost, but returning almost 40% to the shareholder's cash on the balance sheet.

I'm used to tech companies that are a lot less capital intensive.
posted by troy at 12:06 AM on September 19, 2008