Goldman Sachs threatens to leave London if Britain leaves EU

Original post by David_Cook

Twitter went to the markets to raise their capital, they didn't go to Goldman Sachs you plonker.

You have no clue what you are talking about, do you?

Goldman was the main underwriter on Twitter's initial public offering. Goldman led the whole process - how do you think Twitter would list its shares on a stock exchange otherwise?

Reply 82

Original post by will2348

So Twitter used none of the ECM teams at banks to help them? You are kidding right? Tons of banks worked on that deal.

Posted from TSR Mobile

GS may have helped advise Twitter on a suitable opening share price etc, but it was up to individual market participants to go out and buy these newly created shares. Some of the people on this thread are under the illusion that GS actually gave Twitter the money which I think we both agree is false.

Reply 83

Original post by Jefferson Disk

GS didn't give Twitter the money, the shares were bought up by individuals and pension funds etc looking for an investment. GS may have helped manage the IPO but they didn't give physically finance the deal. Quite the opposite in fact, Twitter would have paid them for their advice. Please do a little more research.

(edited 10 years ago)

Reply 84

Pastaferian

Original post by Alfissti

Not the first time they've said so............. in other words old news and probably bluff.

When Goldman Sachs say they'll leave the UK if withdraw from the EU, that may be a bluff. When they say we should stay in the EU, that's the opinion of one corporate entity, and personally I don't care what they do in practice. However, we can expect more of the same - many companies want to see EU reform, but few are in favour of outright withdrawal.

The Institute of Directors is against withdrawal... "the IoD boss warned against outright withdrawal from the European Union, arguing that Britain would remain 'at the heart of European influence' and that there was 'little appetite' among its members for such a move."

The CBI's members are against withdrawal... "8 out of 10 firms say UK must stay in EU. Leaving would hit investment and trade - and make us less competitive." http://www.cbi.org.uk/media-centre/press-releases/2013/09/8-out-of-10-firms-say-uk-must-stay-in-eu-cbi-yougov-survey/

The British Chambers of Commerce's members are against withdrawal - "53.6% of companies surveyed feel that a scenario that sees Britain withdraw fully from the European Union would have a negative business and economic impact, [and only] 1 in 5 (19.5%) believe that full withdrawal could have a positive impact"

I think the voices of reason and sanity have let UKIP make too much of the running of late. We can expect more voices from industry to call for EU reform while rejecting the idea of complete withdrawal. Ultimately, it will be down to the public to decide (we're in a democracy after all) and they'll base their decisions on factors such as will they still have a job if we leave the EU.

Reply 85

Original post by will2348

Goldman Sachs did some of the underwriting.

http://mobile.bloomberg.com/news/2013-11-07/goldman-led-twitter-underwriters-to-make-59-2-million-from-ipo.html

Posted from TSR Mobile

See, I was correct. From the article:

"Goldman Sachs Group Inc. and other underwriters on Twitter Inc. (TWTR)’s initial public offering will share about $59.2 million for managing the sale after accepting one of the smallest fee rates for a U.S. IPO this year.
The banks are receiving 3.25 percent of the $1.82 billion that Twitter raised in its IPO"

Twitter paid GS money for their services GS didn't provide Twitter anything in the way of "equity capital". This is pretty obvious if you understand how people like GS broadly operate.

Reply 86

I think the core point we are trying to make here is that Twitter would not have been able to access the markets without the banks. You could argue there are ways round this but for an IPO as complex at that you'd have to be insane not to use a bank. GS and others will help market the IPO to investors building up momentum in order to allocate the shares, ensure sufficient demand and a successful opening.

Thus without GS, Twitter would not have been able to raise capital.

I think I should clarify also when I refer to equity capital or capital markets interchangeably I am referring to the services the ECM team at a bank provides, not the actual equity capital.

Posted from TSR Mobile

(edited 10 years ago)

Reply 87

Original post by David_Cook

GS didn't give Twitter the money, the shares were bought up by individuals and pension funds etc looking for an investment. GS may have helped manage the transaction, but they didn't give Twitter money. Quite the opposite in fact, Twitter would have paid them for their advice. Please do a little more research.

No one ever said that GS 'gave Twitter money'. They were Twitter's main underwriter on the IPO. To put in very simple terms this means that Goldman took the risk of distributing Twitter's new shares. Should they not have been able to find enough investors, they would have to hold the shares themselves at their own cost.

The fact that Goldman is an underwriter on a given IPO, proves the quality of the stock.

(edited 10 years ago)

Reply 88

Original post by will2348

These IPOs aren't that complex. Do you want to purchase a 50% stake in my roadside lemonade stand? That'll be £1000 and we'll get something in writing to confirm your stake in the business. Sure, if we're talking about a $bn investment you're going to need to scale it up, but in principle it's exactly the same process. GS are a bunch of overpaid middlemen who need us more than we need them, we can easily manage our own mergers and IPOs without their involvement.

Reply 89

Original post by Jefferson Disk

You said earlier, and I quote, that:

"banks like GS provide liquidity to the financial markets"

and Will2348 said that GS lend companies money so they can "pay wages".

Underwriting/insuring something doesn't provide companies like Twitter liquidity to pay wages. GS may help facilitate deals between investors and cash hungry companies looking for an investment but their role isn't to provide liquidity/capital. The High Street banks actually provide most of the liquidity present in the economy through plain old mortgage and business loans.

(edited 10 years ago)

Reply 90

Investment banks provide large companies with long operating cash cycles access to the commercial paper market (money market) if they need to borrow for short-term financing needs such as paying employee wages.

Investment banks do provide liquidity to the markets through market makers ensuring financial instruments can be readily bought and sold improving conditions in the capital markets for large companies to raise capital.

Posted from TSR Mobile

(edited 10 years ago)

Reply 91

Original post by will2348

So you agree that GS are just middlemen? There's no shortage of middlemen here in the UK, there are far too many of them in fact. It helps explain why the economy has been ravaged by debt.

Reply 92

Original post by David_Cook

So you agree that GS are just middlemen? There's no shortage of middlemen here in the UK, there are far too many of them in fact. It helps explain why the economy has been ravaged by debt.

Well, I would argue the most efficient way to access a market such as that is through a specialist entity such as a bank. But I guess that is a matter of opinion and statistics. Investment banks do have the objective of operating as intermediates to improve economic efficiency, yes, I'd agree with that. Not necessarily agree there are too many of them, because the competition between banks is needed to make them efficient - if there were too many, they would be forced to leave the market like RBS has with ECM.

I'd also argue that a bank cannot be held responsible for the ultimate decision made by clients (consumers or companies) with regard to the level of debt they hold as long as the consequences and advise are communicated transparently (agree it might not always be the case).

Posted from TSR Mobile

(edited 10 years ago)

Reply 93

Original post by David_Cook

Your notion of liquidity is very limited.

What I said was correct! GS is a market maker. Market makers stand ready to buy and sell certain securities, providing the required amount of liquidity to the security market and filling the gap when there are short-term imbalances in orders. As a market maker, GS accepts the risk of holding a certain number of securities in order to facilitate trading in that security.

Reply 94

Personally, I'd go even further than this and argue that London is being held back by Europe. If we leave, London could be seen as more of a stronger 'Global Financial Centre' rather than just access to the EU. I think leaving could actually be quite a healthy thing to do long-term.

Posted from TSR Mobile

Reply 95

Original post by Jefferson Disk

Liquidity = cash, or at a stretch assets that can be turned into cash at a moment's notice. Why are you making assumptions about terms we haven't even discussed properly yet?

What you said is incorrect. High street banks do most of the business lending and this liquidity is recycled into wages as employees earn them. The Bank of England then steps in on a nightly basis lending large clearing banks money on a short term basis via the Open Market Operation scheme.

GS play a marginal role in all this, they certainly don't have the leverage to cripple the UK economy if they decide to pull out. They're just trying to scare the British people into submission because GS are in bed with the EU and they want the British to bankroll the whole sordid operation so they can continue to make cash hand over fist. It's sad that some people on here have fallen hook, line and sinker for the 'crucial' role GS plays in the British economy. What would we have done if Twitter hadn't gone public! lol. There would have been a revolution by morning!

(edited 10 years ago)

Reply 96