Goldman Sachs IPO Case

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Business Financial Policy & Strategy Case Analysis: I. Statement of the Problem: In 1882, a partnership was formed between Marcus Goldman and his son in law Sam Sachs to create the financial services firm Goldman Sachs & Co. Due to the strategic management; Goldman quickly grew to become a major commercial paper dealer and eventually would become the market’s leader. Goldman began experiencing exponential success over the years with over 190 partners, 13,000 employees by 1998. However, although it was experiencing success, skeptical speculations begin to arise about Goldman’s ability to maintain its place as market leader considering its competitors issues IPO’s over a decade ago. Goldman being a partnership…show more content…
Considering these optimism trends, Shelf Registration would be least favorable alternative. IV. Final Recommendation: Given the calculations that were projected from the forecast, and the economic state of the market, I recommend that Goldman Sachs move forward IPO for two reasons. First, involves the given calculations of the P/E ratio and P/B ratio. The P/E ratio serves as an indicator of the amount of earnings Goldman receives per share. The P/E ratio for Goldman was 25 making it 7 points above the industry average of 18.83. In addition, the P/B ratio that generated was 5.24, which is higher than the entire industry’s P/B ratio. These two components in addition to favorable market conditions for investment banks allowed us to highly encourage an IPO. If Goldman Sachs went public and allowed the Partners to retain 56% stake, employees receive 24%, and divide the last portion of shares to the public based upon their capital expenditures needs. This would not only provide them with the capital needs to proceed with its global operations and strategic operations but it will also mitigate the risk of losing control of the company. Also by allocating these high percentages to partners and employees, this would serve as motivation of loyalty and compensation for employees who could no longer become partners. Although Goldman Sachs would be
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