Goldman Sachs’ 2021 creatures: Its IPOs, SPACs and direct listings implode after bonuses hit an all-time high

They certainly made hay while the sun was shining.

By Wolf Richter for WOLF STREET.

One of Goldman Sachs’ many splendid creatures in 2021, Chinese ride-sharing company DiDi Global’s American Depositary Receipt plunged 18% today, to $2.01. The ADR is now down 89% from its peak just after its IPO at the end of June last year, of which Goldman Sachs was the main underwriter (data via YCharts):

The company announced two things today, nine months after its IPO:

  1. He plans to pull his shares from the NYSE before he finds a new exchange to list his shares, and won’t even request a relisting until he’s finished pulling his shares from the NYSE.
  2. Its net loss in the fourth quarter nearly doubled to 383 million yuan, while revenue fell 13% to 40.8 billion yuan.

Didi’s effort to list in Hong Kong was scuttled in March, after the Cyberspace Administration of China informed DiDi that its proposals to prevent security and data leaks had failed, according to Bloomberg at the time. .

The issue of delisting DiDi’s U.S. depositary shares arose shortly after the IPO. It turned out that the IPO angered Chinese authorities and cleaned up American investors. So this is not news for stock jockeys who try to buy the dip along the way, only to then get cleaned up as well. But the details of today’s delisting, plummeting revenue and doubling of losses still rattled nerves.

Meanwhile, the good folks at Goldman Sachs are happy: the company took a fee from the IPO, and it may have taken advantage of over-allotment options on the initial pop, and as we now know, she paid her good people record bonuses for 2021.

Goldman Sachs wasn’t the only underwriter in DiDi’s IPO — there were a whole slew of them — but it’s the lead underwriter, the “lead on the left,” who has the lion’s share of responsibility and gets the lion’s share of the costs. On DiDi’s IPO, the second and third joint bookrunners were Morgan Stanley and JP Morgan Securities. Other underwriters included a slew of companies around the world, in Hong Kong, China, Japan, New Zealand, and more. Everyone was trying to make a kill.

In addition to fees, underwriters also have the option of buying the shares at the IPO price and selling them during the post-IPO pop, thus being one of the big sellers that contributed to bring down these stocks after the pop.

The benefits to underwriters from IPOs can be very significant, especially if there is a big “pop” at the start.

Here are some of the creatures that went public in 2021 where Goldman Sachs was the main bookrunner on the left that have now imploded and are included in my imploded stocks. The current stock price and decline from the high is shown:

  • vroom [VRM]: $1.90; -97%
  • Robin Hood [HOOD]: $10.99; -87%that Goldman has now cut to “sell”, LOL
  • stitch correction [SFIX]: $9.55; -86%
  • Bumble dating app [BMBL]: $25.63; -70%
  • Olaplex hair care [OLPX]: $14.96; -50%
  • Hospital scrubs with figs etc. [FIGS): $18.37; -63%
  • Compass real estate tech [COMP]: $5.98; -73%
  • Erase Secure [YOU]: $28.33; -57%

Coinbase, a crypto exchange, did not go public via an IPO but via a direct listing in April 2021, so there were no “subscribers”. The shares have just started trading rather than being sold at the IPO price before they start trading. But Goldman Sachs acted as lead financial adviser, followed by JP Morgan, Allen & Co. and Citigroup.

It was the largest direct quote ever. This was called a “historic moment” for crypto at the time. The hype was gigantic. The shares [COIN] started trading at $381, reached $429, which was also the high point, and ended the day at $328, valuing it at $85.7 billion. Shares now have 66% dive from the first-day high at $145.16.

square space [SQSP], which is into website hosting that included WOLF STREET’s predecessor site, was another direct listing where Goldman Sachs was the lead financial advisor. It started trading in May 2021. The shares peaked in June and have since 65% dipped at $22.58.

But they’re all the same on Wall Street.

2021 was a huge banner year, with 396 IPOs and 613 SPACs, raising a total of $316 billion from gullible, hype-addicted investors, and generating billions of dollars in fees and profits through the selling during the initial “pop” of the shares.

I am not only attacking Goldman Sachs. Goldman Sachs happened to be the most prolific first underwriter of conventional IPOs (not SPAC) in 2021, with 147 U.S. IPOs, worth $16.2 billion. , according to Dealogic. This includes IPOs where Goldman Sachs was not the lead underwriter.

JPMorgan Chase was No. 2 with 146 classic IPOs, valued at $15.2 billion. Morgan Stanley was No. 3 with 134 IPOs, valued at $14.3 billion. Next come Bank of America, Citigroup and others.

SPACs have collapsed even more dramatically than IPOs. But Goldman Sachs was just No. 2 with 62 SPAC listings, behind No. 1 Citibank with 108 SPACs, according to Dealogic. Cantor Fitzgerald was No. 3 with 60 SPAC entries. Next come Credit Suisse, Morgan Stanley and others.

Doing “God’s Work”: As IPOs and SPACs imploded, bonuses soared.

Goldman Sachs, when it announced its fourth quarter results three months ago, revealed that it had earmarked $17.7 billion for employee compensation spending in 2021, up 33% from 2020, for an average of $404,000 per employee. Always doing “God’s work”, as then-CEO Lloyd Blankfein so eloquently put it in 2009.

For Goldman Sachs’ top performing investment bankers — including those responsible for imploding IPOs and SPACs and similar ‘divine work’ — the annual bonus pool has grown by 40% to 50%, sources say. cited by Reuters.

Wall Street’s 2021 aggregate compensation hit a record $257,500 per employee, up 20% from a year ago, on record profits, according to a report from the New State Comptroller. York, Thomas P. DiNapoli.

But Goldman Sachs hit the headlines last week with an unpleasant turn of events: its first-quarter earnings report, in which it revealed that in the first quarter of this year, investment banking revenue — including IPO and SPAC fees — fell 36% to $2.4 billion. And those asset management revenues plummeted 88%, “primarily reflecting net losses in equity investments and significantly lower net revenues in loans and debt investments,” he said. Other Wall Street banks made similar admissions and their shares fell. So that template is in place for now. But they certainly made hay while the sun was shining.

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