25 years since Wall Street’s elite firm went public

Goldman Sachs this week celebrated 25 years as a public company. The Wall Street investment bank has not always wanted to act like one.

In the early years after the initial public offering, longtime chief financial officer David Viniar was said to privately joke that “disclosing the weather is too much information”.

Goldman’s IPO in May 1999 was a seminal moment for the then 130-year-old investment bank, and its 221-strong partnership, which had already spent almost 15 years debating whether to seek public equity capital.

The firm plans to mark the occasion by assembling a replica of the New York Stock exchange balcony where then-chief executive Hank Paulson rang the opening bell, so employees can take their own picture.

“The need for permanent capital made it inevitable we would go public,” said Lloyd Blankfein, the second of just three chief executives of the bank since its IPO, and a partner before the float.

“We feared we would lose our distinctive partner culture that had propelled our success. Miraculously, that culture has largely survived, and still affects how people conduct themselves and meet their responsibilities,” Blankfein told the Financial Times. “And the title still has cachet on the Street.”

But being a partner in Goldman Sachs in 2024 no longer means what it once did.

In the quarter of a century since the bank called time on its partnership structure and handed ownership of one of New York’s most prestigious financial institutions to stock market investors, Goldman’s bankers have sometimes struggled with the shift in accountability to outside shareholders.

In addition to Viniar’s private joking, chief executives Paulson and Blankfein would not speak on earnings calls, while the bank did not set regular public financial targets.

“The disclosures of Goldman after it became public would be laughable if it wasn’t so awful for investors,” said Mike Mayo, research analyst at Wells Fargo who has tracked Goldman’s stock for around two decades.

Insiders said Goldman’s level of disclosure at the time was not particularly bad compared with peers such as Bear Stearns or Lehman Brothers, both of which failed in the financial crisis.

Still, “their disclosures lagged peers for a while, many years even after the IPO”, said Jason Goldberg, a research analyst at Barclays who has covered Goldman for more than 10 years.

The bank’s early success meant that it could afford to be more opaque. It wooed potential IPO investors in glitzy hotels including the Ritz. “That just shows the aspirational multiple they were looking for,” recalls one investor.

For its first decade as a public company, it handed investors swashbuckling profits from its money-spinning investment banking and trading businesses. Profits tripled between 2000 to 2007. It is alone among the big six US banks in outperforming the S&P 500 over the past 25 years.

“When things are good, you get away with a lot more,” said Goldberg.

In the early years after its float, Wall Street analysts struggled to understand how the bank made its money. “It wasn’t until John Waldron [bank president since 2018] that I actually had . . . a good meeting at Goldman Sachs,” said Mayo.

“Very nice and smart people, don’t get me wrong. David Viniar is a star CFO. He just wouldn’t answer questions in meetings. He’d talk and then at the end, like what did we get out of that? I don’t think we got anything out of it. I think that was their goal.”

The start of its second decade as a public company, in the depths of the 2008 global financial crisis, paled in comparison to the first — and opened it up to a far harsher regulatory spotlight as it switched from a brokerage firm to a bank holding company.

When David Solomon became chief executive in 2018, his “mandate was to make Goldman function more as a public company even though it had been public already for two decades”, said Mayo.

Solomon has tried to make the bank more shareholder-friendly, hosting the company’s first investor day four years ago and speaking on quarterly results calls. “They’ve now made strides under Solomon’s tenure,” Goldberg added.

Still, if analysts now understand how Goldman makes its money, in recent years it is the bank that has grappled with how best to generate it for investors.

Following the 2008 financial crisis, the bank wound down its proprietary trading arm. For several years, Goldman kept wagering its own capital on investments such as private equity and real estate. It is now in the process of paring back that business to make its earnings less volatile.

Instead, it has sought more predictable earnings elsewhere.

A foray into consumer lending, with the launch of its Marcus brand in 2016 and the subsequent $1.7bn purchase of online lender GreenSky, later written…