Goldman Sachs

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Lore & Background

During the Great Depression, Sidney Weinberg assumed the role of senior partner in 1930 and shifted the firm's focus away from trading and toward investment banking, helping to restore its tarnished reputation. Under Weinberg's leadership, Goldman Sachs was the lead advisor on the $657 million IPO of Ford Motor Company in 1956 and the $350 million debenture offering by Sears Roebuck in 1958. In 1970, the firm faced a crisis when the Penn Central Transportation Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued through Goldman Sachs; this bankruptcy resulted in credit ratings for every issuer of commercial paper today. The firm opened its first international office in London in 1970 and pioneered the 'white knight' strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid. On November 16, 1981, the firm acquired J. Aron & Company, a commodities trading firm. Goldman Sachs became a public company via an IPO in May 1999, selling 12.6% of the firm to the public; after the IPO, 48.3% of the firm was held by 221 former partners, 21.2% by non-partner employees, and the remaining 17.9% by retired partners and two long-time investors.

Reader's Guide

Goldman Sachs has played a central role in the development of modern investment banking and global finance. Its early innovation in using commercial paper for entrepreneurs and establishing the price–earnings ratio as a method for valuing companies helped raise funds for retailers and companies with few hard assets. The firm entered the IPO market in 1906 by taking Sears, Roebuck and Company public, facilitated by Henry Goldman's personal friendship with Julius Rosenwald. In 1986, Goldman Sachs underwrote the IPO of Microsoft. The 1970 Penn Central bankruptcy was a pivotal event that led to credit ratings for commercial paper issuers. As a systemically important financial institution, Goldman Sachs' activities in trading, asset management, and private equity have significant implications for global financial stability. Its transformation from a partnership to a public company in May 1999 marked a shift in Wall Street culture. The firm's history also includes the failure of the Goldman Sachs Trading Corp. during the Wall Street Crash of 1929, amid accusations of share price manipulation and insider trading.

Did You Know?

• Goldman Sachs was founded in 1869 by Marcus Goldman in a one-room basement office next to a coal chute.
• The firm pioneered the use of commercial paper for entrepreneurs and joined the New York Stock Exchange in 1896.
• In 1956, Goldman Sachs was the lead advisor on the $657 million IPO of Ford Motor Company.
• The 1970 bankruptcy of Penn Central Transportation Company, with over $80 million in commercial paper issued through Goldman Sachs, led to credit ratings for all commercial paper issuers.
• Goldman Sachs became a public company via an IPO in May 1999, selling 12.6% of the firm to the public.