Goldman Sachs chief David Solomon defends woeful WeWork IPO
Goldman Sachs Chief Executive David Solomon turned heads in Davos, Switzerland, on Tuesday by defending his bank’s handling of WeWork’s notoriously disastrous initial stock offering.
“I’m not sure that we got it so wrong,” Solomon said of the most calamitous IPO process in recent memory. “There were things that were right, there were things that were wrong,” Solomon said of the failed fundraising effort, which resulted in WeWork’s valuation getting slashed from $47 billion to $8 billion and its controversial co-founder, Adam Neumann, stepping down as CEO.
In pushing to take WeWork public, Goldman had reportedly floated a valuation as high as $90 billion for its parent firm, The We Company. But Tuesday, Solomon sought to distance his bank from the frothy valuations that ultimately came to haunt the money-losing firm after would-be investors balked at its lack of profitability.
“The way the process of an IPO works when you’re a bank is, you’re invited in by a company,” Solomon said during a World Economic Forum panel discussion hosted by CNBC. “It’s a private company, their numbers aren’t public; they give you a model. You say to the company, ‘Well, if you can prove to us that the model actually does what this does, then it’s possible it could be worth this in the public markets.’
“I think that’s a great example of the process working,” said Solomon. “It might not have been as pretty as everybody would like it to be.”
After the IPO was pulled in September — in part due to concerns of self-dealing by Neumann — Goldman was forced to report a loss of $80 million on its 1.4 percent stake, helping to fuel a 26 percent plunge in third-quarter profits.
Of course, Solomon wasn’t the only titan of industry making bold statements at the annual meeting in the Swiss Alps.
Hedge fund billionaire Paul Tudor Jones told CNBC earlier Tuesday that the recent bull market feels eerily similar to the frothy days leading up to the dot-com bubble in 1999.
“We are just again in this craziest monetary and fiscal mix in history,” he told the network. “It’s so explosive. It defies imagination.”
The World Economic Forum — held every year in the Swiss ski resort of Davos — is known for getting the world’s wealthiest people together to discuss big problems, such as income inequality. As JPMorgan CEO Jamie Dimon once famously quipped, Davos “is where billionaires tell millionaires what the middle class feels.”
This year, attendees are expected to focus heavily on climate change even as reports estimate that private planes flying in and out of Davos this year will add more than 18 metric tons of CO2 emissions to the pristine alpine air.