NEW YORK (
says it isn't going private.
"No consideration is being given to taking the firm private," spokesman Michael DuVally told
Rumblings were felt Friday afternoon when
Fox Business News
reporter Charlie Gasparino said he had heard from sources that Goldman was mulling going private. The speculation follows a story earlier this week from
that said the firm was preparing to either spin off its proprietary trading desk into a separate entity, or wind it down and move traders from that division into its asset-management arm.
Goldman is now stuck in a position in which the best move for the firm may not be the best move for shareholders. Of course, management is responsible for protecting shareholders in whatever decision it makes.
Unlike other big banks getting rid of hedge funds, proprietary desks and private-equity holdings, Goldman's bread and butter isn't lending. It's helping corporate clients issue debt and equity, forging mammoth M&A, and making moves in the market.
The division that houses prop trading has delivered 78% of the Goldman's total revenue so far this year. Ron Geffner, a partner at Sadis & Goldberg, which represents hedge funds, broker dealers and other firms on Wall Street, says he didn't understand why Goldman's stock was shooting up on word of the spin-off.
"The whole thing didn't make any sense because it's a compromise to the position they're in. Goldman yields much more profit on allowing traders to trade Goldman's proprietary capital and earn 100% of the profits rather than earning a management fee of a percentage of the profits."
But besides the top- and bottom-line results, Goldman's prop-trading performance is worth its weight in gold for Goldman's reputation: It lets clients know that Goldman is the most talented firm on The Street. So, instead of going private entirely, which may not benefit shareholders very much, considering how far the stock has fallen in recent months, Goldman could simply forgo its banking license.
Geffner says Goldman has a tough job ahead of it in determining what to do. If it does go back to being an investment bank, it will also forgo cheap funding from the Federal Reserve, which has interest rates set at bare minimums. Still, the long-term rate outlook is bullish. As Goldman goes forward, it will have to weigh the benefit of cheap money vs. weak returns.
Additionally, it may be hard to retain the best and brightest traders who sit within its prop trading arm today. There are different rules for asset management, and it's unclear how compensation would be structured, and trading money from 401(k)s doesn't have the same appeal as trading money for the bottom line of a Wall Street titan.
If Goldman remains a publicly traded company, but one that isn't a bank, "it can still use stock to acquire businesses and people," says Geffner.
Goldman shares finished Friday at $155.18, down 74 cents.
-- Written by Lauren Tara LaCapra in New York
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.