- Goldman Sachs has offered its richest clients a chance to invest in fintech Stripe.
- It is a rare peek into how banks cater to the wealthy with exclusive investment opportunities.
- With the market slowdown, these opportunities are getting more attractive for both banks and clients.
Goldman Sachs has invited wealth management clients to invest in fintech unicorn Stripe, as reported by Bloomberg.
The bank is setting up an investment vehicle that would allow private-wealth clients, who must have a minimum of $10 million in assets, access to the payment giant’s latest $4 billion fundraise, the outlet reported. Stripe plans to use the proceeds to pay out restricted stock units to longtime employees and pay associated taxes.
In a tweet that has since been deleted, venture capitalist Mark Goldberg expressed surprise at an email from the bank about the offering. The message was a rare peek into how the richest bank clients can access investments normally off-limits to individual investors. Goldberg did not respond to Insider’s request for comment in time for publication.
According to reports, Stripe hired Goldman Sachs and JPMorgan to explore a liquidity raise or public listing last month. Spokespeople for JPMorgan, Goldman Sachs, and Stripe declined to comment.
“The nature of the offering – in this case, Stripe – is pretty unique. It’s a pretty big fundraise,” said Stephen Biggar, director of financial services research at Argus Research. “These banks would typically put some of their best clients in IPOs. There is just a big dearth of activity in that space, so it’s a way of offering clients something that the bank has a part in to try to help.”
Access to these opportunities has previously been reserved for big money investors, including venture capital, mutual funds, and pensions. Now they are a selling point for top private banks vying for a narrow slice of clients. Citi and JPMorgan, for instance, both have teams dedicated to direct private investments for private bank clients.
With a volatile stock market, these types of private investments are only going to become more desirable. Stripe is one of many fast-growing companies to delay going public with the IPO market at a standstill.
“One of the challenges with this current environment is that our expectations for marketable securities for the liquid market are pretty low for the next five to 10 years,” said Shannon Saccocia, chief investment officer at SVB Private. “Filling that gap in terms of return is why I think everyone is sort of looking at alternatives,” she added. “If you invest when nobody wants to invest in venture, those are when the best returns are.”
Even before this market slowdown, companies were staying private for longer. In 2000, private equity-backed company went public at a median age of six years, compared with 11 years in 2021. (Stripe was founded 12 years ago).
“These mega deals, known as unicorns, in the space have just been few and far between, and I think that has just generated more than average level of interest,” added Biggar.
It’s also a way for big banks to flex their muscles as one-stop shops. If the investment bank wins a mandate to explore a potential IPO or fundraise they can raise money beyond their normal roadshow to big investors by tapping their own wealth management clients.
Wealth management clients of Goldman Sachs and Morgan Stanley got a piece of Uber before its IPO, which the latter bank led. Though Uber’s IPO crashed, these deals can be win-win-win scenarios for banks, making wealth management and company clients happy and reaping fees.
This might come in handy as some institutional investors pull back from startup bets or pass because they don’t want to be overexposed to an asset or asset class. And as an economic downturn approaches, this trend is likely to continue.
Goldman Sachs’s global asset management head Julian Salisbury acknowledged that the bank has experienced some “cooling” among US institutional investors but said the bank’s other two main sources of capital had not.
“Insurance is a real power alley for us. Private wealth is a real power alley for us, and those continue to be good sources of funding,” said Salisbury at a conference in September.