| BUSINESSWEEK ONLINE : JANUARY 25, 1999 ISSUE | ||||||||
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| COVER STORY
How Much Is Goldman Worth? Maybe Less Than You Think How much would Goldman Sachs go for in an IPO? Not an easy question. Goldman is unique. You can't beat the name--which rivals Tiffany (TIF) or Rolls-Royce for prestige. But the consistency of Goldman's earnings is suspect. Though the firm stresses its investment banking, much of its profits come from trading. The result is that Goldman likely would be valued in the middle of the Wall Street pack should it sell shares, says Raphael Soifer, analyst at Brown Brothers Harriman & Co. A Merrill Lynch & Co., he says, would command a higher multiple since it earns more from steadier businesses such as fund management. But Goldman would be valued more highly than a smaller, less powerful company like Lehman Brothers Inc. And that leads to another question: Which multiple? Using price to earnings is fanciful because Goldman has yet to reveal its profits after it pays its partners. On the other hand, a price-to-book calculation is possible. Last year, when investment banks were trading at more than four times book value, Goldman would have been worth $25 billion to $30 billion. Now, its valuation would be lower. Consider that Merrill is only trading at 2.7 times book. At that multiple, Goldman would be worth only $17 billion--or to put it another way, $6 billion less than the market capitalization of Amazon.com.(AMZN) By Gary Silverman in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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