As The Softbank Tide Goes Out, Goldman Sachs Has Been “Swimming Naked”
Earlier this week, we penned a piece detailing how the SoftBank Vision Fund was “swimming naked” as its investments in WeWork and Uber imploded.
Now Bloomberg has revealed that Goldman Sachs is swimming without a bathing suit, exposed to technology unicorns that have recently seen steep valuation losses over the last several months, forcing the bank to eat a $260 million loss.
Goldman took heavy losses in Uber and Avantor in 3Q19. Uber has lost over 30% of its value in the last 100 trading days, while Avantor has suffered a similar amount in 62 trading days. Both declines led to a $200 million loss for the investment bank.
One analyst told Bloomberg that quarterly volatility in Goldman’s Investing & Lending (I&L) division is another reason for the 3Q loss.
“The ‘I’ in the I&L can still be chunky and difficult to forecast,” said Mike Mayo, a senior bank analyst at Wells Fargo & Co. “It’s certainly a headwind in the quarter.”
Mayo forecasted that Goldman’s I&L could drop 30% from 2Q to 3Q. The bank’s executives have said they plan to move their merchant banking units out of investing in unicorns and IPOs, and more towards wealth management.
Goldman credited Uber, Avantor, Tradeweb, and HeadHunter, with boosting 2Q results. The firm said those companies going public generated an unusual one-time gain. The most significant gain was Tradeweb, the firm profited $500 million in gains.
Since 2Q, Uber, Avantor, and Tradeweb have mostly imploded, besides HeadHunter holding 25% gains since debuting on the public markets about 102 days ago.
The four companies made up at least half of the firm’s $2.6 billion public investment portfolio as of June 30, CFO Stephen Scherr said in July.
Bloomberg said Goldman invested in Uber at an early stage. The firm holds nearly 10 million shares.
Goldman made $400 million in proceeds from Avantor’s IPO in 2Q, along with merger advisory work before the new listing hit public markets.
And while Bloomberg didn’t discuss Goldman’s WeWork exposure, we’re sure the valuation implosion of the shared workspace company will add more pain to the investment bank’s books in the quarters ahead.
From SoftBank to now Goldman, these are the firms swimming butt naked as the tide quickly goes out. This phrase has been widely popularized by Warren Buffett, who has famously said, “You only find out who is swimming naked when the tide goes out.” And in our own view, the collapse of unicorn valuations and the implosion of the IPO market, has caught many off guard.
Thu, 10/03/2019 – 17:05