GOLDMAN PARTNERS SEIZE CHANCE TO OFFLOAD STOCKS / THE FINANCIAL TIMES

Goldman partners seize chance to offload stock


By Greg Farrell in New York

Published: July 16 2009 23:35

Part of the “secret sauce” of Goldman Sachs’ success is an unusually high rate of ownership in the bank’s shares by the firm’s 300-plus partners. The internal stock ownership rate – which Goldman does not disclose but Bloomberg pegs at 6 per cent – is a carryover from the firm’s days as a privately held partnership.

The goal of the programme, and it has been largely successful in Goldman’s 10 years as a public company, is to align closely the partners’ interests with those of the firm. It is a goal shared by Goldman’s competitors although, as Lehman Brothers and Bear Stearns demonstrated, significant levels of ownership among employees and executives is no guarantee of success.

Nevertheless, partner ownership of Goldman stock is down from normal levels owing to two recent trends: in two separate capital raises since September, Goldman expanded its public float from 395m shares to 503m shares.

Also, during the same period, Goldman’s partners sold some 7.6m shares in the firm, netting $691m. There were some purchases of Goldman stock by its partners, particularly after a strong first-quarter earnings announcement this year, but the purchases did not come anywhere near offsetting the share sales.

Share sales among Goldman partners were calculated by the Financial Times using information from filings with the Securities and Exchange Commission. According to the Financial Times’s calculations, eight Goldman partners sold $10m worth of stock or more between September 17, just after the collapse of Lehman, and May 4.

The top five sellers included Masanori Mochida, head of Goldman’s Japan operations, who sold 500,000 shares on September 17 to net $55.7m; Milton Berlinski of Goldman’s financial sponsorship division, who sold $26.5m; Jack Levy, co-head of mergers and acquisitions, who sold $17.4m; Henry Cornell of Goldman’s private equity unit, who sold $15m; and Richard Friedman, also of Goldman’s private equity unit, who sold $13.8m.

None of the five men responded to calls or e-mails about their stock sales, and Goldman declined to comment.

Mr Friedman bought at least 250,000 shares of Goldman stock in September, making him a net buyer for the period. Mr Berlinski has also purchased shares in the past year, according to the SEC filings. All Goldman partners, including the five top sellers, received more shares in the firm as part of their 2008 bonuses and were in line for another heavy dose of shares for next year’s bonus.

All the share sales studied by the FT took place during the normal windows of opportunity available to employees and executives at Goldman. Because the partnership group owns more than 5 per cent of Goldman’s shares, every time the collective ownership shifts by more than 1 per cent, the firm has to file an update with the SEC.

The situation is different for named executive officers, such as chief executive Lloyd Blankfein. Any share sales at his level have to be reported to the SEC and investors immediately.

Mr Blankfein’s last sale of Goldman stock was in January 2008, when he sold 65,917 shares for $12.9m. Gary Cohn, chief operating officer, sold 79,883 shares during that same period, netting $15.6m.

By contrast, Jon Winkelried, who had been president and co-chief operating officer of Goldman before stepping down earlier this year, sold $57.2m in stock between 2006 and 2009.

On top of that sum, Mr Winkelried received a pay-out of $19.7m in September from his ownership in an illiquid Goldman investment fund. Gregory Palm, the firm’s general counsel, also received a pay-out, totalling $38.3m, from the liquidation of some of his holdings in the fund.

In March, Goldman said the group arranged the special pay-outs to eliminate the need for Mr Winkelried and Mr Palm to sell shares on the open market.


Copyright The Financial Times Limited 2009