Solomon took a strange dig at Credit Suisse and Citi on Goldman’s recent quarterly earnings call. He delivered remarks about special purpose acquisition companies (Spacs) that were clearly rehearsed, saying that the current explosion in deal volume is unsustainable.
“We generally strive to be number one in league tables,” Solomon said. “We do not strive to be number one in the Spac league table. [Although] we are very active, we’re very thoughtful about our sponsors and the business that we take on. And just looking at last year, if you look at the number of Spacs that were done and the league table leaders, the number one and number two firms did about 33% more deals than we did – representative, I think, of some of the things that came to us that we turned away.”
Goldman ranked number three for Spac deals in 2020 behind Credit Suisse and Citi.
The number one firm – Credit Suisse – avoided taking Solomon’s remarks too personally and concurred with his view that $15 billion of Spac volume in the first two weeks of 2021 does not represent a viable run-rate for the rest of the year.
“I would agree with David Solomon that is not sustainable – there will not be $360 billion in 2021,” Niron Stabinsky, head of Spacs at Credit Suisse, tells Euromoney. “We are, however, confident that there has been a structural shift, whereby Spacs have been adopted by the technology sector, and that they will continue to be a significant and enduring portion of the IPO market.”
Selective
And what about Solomon’s claim that Goldman is a highly fastidious underwriter of Spac deals, with never a thought for the number one slot?
“We are also very selective – it’s not our objective to be number one in Spac underwriting, it just so happened that in 2020 we were number one,” Stabinsky says. “We could have done double our volumes easily and been number one by a multiple.”
Solomon acknowledged the contrast with how Goldman presents rankings it likes, such as its number one slots in completed M&A and equity offerings last year. Singling out Credit Suisse and Citi rather than smaller and scrappier firms like Cantor Fitzgerald or Jefferies that pitch for Spac deals still felt strange, however.
Solomon acknowledged the contrast with how Goldman presents rankings it likes
Perhaps Solomon doesn’t feel it would be dignified to get in a fight with a broker like Cantor’s notoriously pugnacious chief executive Howard Lutnick. Sour grapes over losing out on a Spac deal by former Goldman president Gary Cohn could be another explanation for Solomon’s spleen.
When Cohn raised $720 million for his vehicle Cohn Robbins Holdings last September, Credit Suisse was sole IPO bookrunner.
By the time Cohn refused to help out Goldman in December by returning compensation as part of the bank’s 1MDB settlement (Cohn made a charitable donation instead), it was starting to feel like he and Solomon just don’t get along.
Old colleagues
There are other ex-bankers pitching Spac deals who are difficult for old colleagues to handle.
Former Credit Suisse chief executive Tidjane Thiam is reportedly planning a Spac via JPMorgan rather than his old firm, for example, which may or may not be linked to the way Thiam’s forced departure was followed by a cut to his final bonus by the Credit Suisse board last year.
And at Citigroup, the rise to the number two Spac league table ranking (not that it matters, of course) has been helped by deals done for Michael Klein, Citi’s former investment banking rainmaker.
Klein was purportedly disliked by many colleagues for a high-handed style before he ended his 23-year career at Citi in July 2008 in a well-timed departure just before the global financial crisis.
But that was a long time ago. It is now apparent that Klein is in fact one of the most valuable clients for Wall Street firms.
Goldman bankers who are pitching to get on future Spac deals or ancillary business awarded by Klein will have to hope he doesn’t take Solomon’s dig at Citi-led Spacs personally.
