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Goldman underwrote a lot of companies, if anybody wants to dig through the whole list: http://www.nasdaq.com/markets/ipos/offering-history.aspx?expert=goldman%2

Goldman underwrote a lot of companies, if anybody wants to dig through the whole list: http://www.nasdaq.com/markets/ipos/offering-history.aspx?expert=goldman%2c+sachs+%26+co&page=24 http://www.nasdaq.com/markets/ipos/offering-history.aspx?exp... The first name I saw that IMHO would qualify as a watermelon was Etoys Inc.

tptacek 9y ago
I don't think that's a good example. For one thing, eToys had been in business for several years before IPO. For another, toys are a surprisingly difficult logistics problem for retailers (a friend told me stories about the bear of a time Amazon had with them). But most damning to the narrative Taibbi wants to sell, Goldman got in trouble with eToys --- for underpricing it. The founder of eToys went on to start Gamefly, and then took over as President of Gap Direct. This isn't to say that eToys is a solid company by the standards we set for modern tech companies. But it's not a watermelon thrown out of a window, either.
- microtherion 9y ago
  The reason eToys stuck in my mind was their ham fisted legal battle against eToy: http://www.independent.co.uk/news/business/analysis-and-features/etoys-vs-etoy-743280.html http://www.independent.co.uk/news/business/analysis-and-feat... Can we agree that WebVan was a watermelon company?
  - tptacek 9y ago
    Of course not! Webvan was an enormous undertaking. No amount of bongwater gets you the service Webvan built --- a service, for what it's worth, that has also created several unicorns, an IPO, and the largest Amazon acquisition in its history. I was a Webvan customer in San Francisco, and it was better than anything I had for 10+ years afterwards. Be careful about what you're trying to argue. If Taibbi was just arguing that Goldman participated in the startup market, and that most startups fail, he'd be saying something true but banal. But that's not what Taibbi's saying. He's saying something that's not banal, but also probably not true.
- camelite 9y ago
  > But most damning to the narrative Taibbi wants to sell, Goldman got in trouble with eToys --- for underpricing it. I think you're underestimating Taibi's argument if you think the IPO-ing firm being pissed off at a later date argues against Goldman pulling off a scam, or that under-pricing and over-pricing can't be part of the same scam. There are 4 actors here: a) Goldman b) Goldman's preferred clients c) The company d) The investing public The argument goes that Goldman underprices the IPO initially. Their preferred investors get cheap stock. The stock goes public. The preferred investors have agreed to buy post-IPO stock. This causes the stock to rise. This rise doesn't appear to the investing public to be artificial, but a stock with momentum. This causes the price to shoot up. At some point the insiders take their gain and sell their stock. They then reward Goldman by channeling a significant portion of their profits back to them by using their underwriting services. As a post-script, the thing that first struck me was, if they screw their clients, how do they get new ones. Well if you read on to the next section, Taibbi explains part of that puzzle too: "Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business." Losers: a) The company: they have less money to invest in their company's success, and fewer "long-haul" stock-holders than they would like. b) The investing public who buy high, sell low. Winners: a) Goldman's clients - buy low, sell high b) Goldman - they build long-term relationships with investors and skim some of the profit back directly Here's the eToys guy: After the deposition, he recalled, the S.E.C. lawyers began to show him some Goldman Sachs documents. He saw that one big firm after another had been allocated shares — and had immediately flipped them, even though Goldman had promised that its clients would support the stock. “That’s when I thought, ‘We really got screwed,’” Lenk told me. Although the experience still angered him, he now has 14 years’ worth of perspective. “Look at what has happened since then,” he said. “If you think eToys got screwed, what do you think happened to the country?” “What Wall Street did to us in 1999 pales in comparison to what they did to the country in 2008,” he said. http://www.nytimes.com/2013/03/10/opinion/sunday/nocera-rigging-the-ipo-game.html http://www.nytimes.com/2013/03/10/opinion/sunday/nocera-rigg...
  - tptacek 9y ago
    Taibbi's argument is that simply by backing a company like eToys, it's participating in the sale of exploding watermelons to the general public. Nocera's argument is that not only was eToys not an exploding watermelon, but Goldman's IPO shenanigans possibly prevented it from surviving the 2000-2001 startup collapse. I don't see how the two arguments can be compatible. Note that it's not enough to observe that Goldman can be shady. It has to be shady the way Taibbi says it is, or else all Taibbi is doing is appealing to our emotional beliefs about Goldman. That's not journalism.

tptacek 9y ago

I don't think that's a good example. For one thing, eToys had been in business for several years before IPO. For another, toys are a surprisingly difficult logistics problem for retailers (a friend told me stories about the bear of a time Amazon had with them). But most damning to the narrative Taibbi wants to sell, Goldman got in trouble with eToys --- for underpricing it. The founder of eToys went on to start Gamefly, and then took over as President of Gap Direct. This isn't to say that eToys is a solid company by the standards we set for modern tech companies. But it's not a watermelon thrown out of a window, either.

microtherion 9y ago
The reason eToys stuck in my mind was their ham fisted legal battle against eToy: http://www.independent.co.uk/news/business/analysis-and-features/etoys-vs-etoy-743280.html http://www.independent.co.uk/news/business/analysis-and-feat... Can we agree that WebVan was a watermelon company?
- tptacek 9y ago
  Of course not! Webvan was an enormous undertaking. No amount of bongwater gets you the service Webvan built --- a service, for what it's worth, that has also created several unicorns, an IPO, and the largest Amazon acquisition in its history. I was a Webvan customer in San Francisco, and it was better than anything I had for 10+ years afterwards. Be careful about what you're trying to argue. If Taibbi was just arguing that Goldman participated in the startup market, and that most startups fail, he'd be saying something true but banal. But that's not what Taibbi's saying. He's saying something that's not banal, but also probably not true.
camelite 9y ago
> But most damning to the narrative Taibbi wants to sell, Goldman got in trouble with eToys --- for underpricing it. I think you're underestimating Taibi's argument if you think the IPO-ing firm being pissed off at a later date argues against Goldman pulling off a scam, or that under-pricing and over-pricing can't be part of the same scam. There are 4 actors here: a) Goldman b) Goldman's preferred clients c) The company d) The investing public The argument goes that Goldman underprices the IPO initially. Their preferred investors get cheap stock. The stock goes public. The preferred investors have agreed to buy post-IPO stock. This causes the stock to rise. This rise doesn't appear to the investing public to be artificial, but a stock with momentum. This causes the price to shoot up. At some point the insiders take their gain and sell their stock. They then reward Goldman by channeling a significant portion of their profits back to them by using their underwriting services. As a post-script, the thing that first struck me was, if they screw their clients, how do they get new ones. Well if you read on to the next section, Taibbi explains part of that puzzle too: "Here the investment bank would offer the executives of the newly public company shares at extra-low prices, in exchange for future underwriting business." Losers: a) The company: they have less money to invest in their company's success, and fewer "long-haul" stock-holders than they would like. b) The investing public who buy high, sell low. Winners: a) Goldman's clients - buy low, sell high b) Goldman - they build long-term relationships with investors and skim some of the profit back directly Here's the eToys guy: After the deposition, he recalled, the S.E.C. lawyers began to show him some Goldman Sachs documents. He saw that one big firm after another had been allocated shares — and had immediately flipped them, even though Goldman had promised that its clients would support the stock. “That’s when I thought, ‘We really got screwed,’” Lenk told me. Although the experience still angered him, he now has 14 years’ worth of perspective. “Look at what has happened since then,” he said. “If you think eToys got screwed, what do you think happened to the country?” “What Wall Street did to us in 1999 pales in comparison to what they did to the country in 2008,” he said. http://www.nytimes.com/2013/03/10/opinion/sunday/nocera-rigging-the-ipo-game.html http://www.nytimes.com/2013/03/10/opinion/sunday/nocera-rigg...
- tptacek 9y ago
  Taibbi's argument is that simply by backing a company like eToys, it's participating in the sale of exploding watermelons to the general public. Nocera's argument is that not only was eToys not an exploding watermelon, but Goldman's IPO shenanigans possibly prevented it from surviving the 2000-2001 startup collapse. I don't see how the two arguments can be compatible. Note that it's not enough to observe that Goldman can be shady. It has to be shady the way Taibbi says it is, or else all Taibbi is doing is appealing to our emotional beliefs about Goldman. That's not journalism.