Online Extra: Q&A with Goldman's Bradford Koenig
Goldman Sachs & Co. is arguably the most prestigious investment bank in the country, and it certainly is one of the most careful about its reputation. After the crash in Net stocks, BusinessWeek examined how companies backed by different investment banks and venture capital firms have performed since going public. The idea was to figure out which financial firms have performed well and which poorly in supporting Net companies.
The average return for the Net companies taken public by Goldman is better than lots of its peers, but many of the stocks do trade below their offering prices. Bradford C. Koenig, managing director at Goldman, agreed to talk with BusinessWeek's Peter Elstrom about the firm's track record and how other investment banks performed during the boom and bust of the Internet. Edited excerpts follow:
On how investors' attitudes about unproven companies changed in the late 1990s:
The market itself enabled a compression in company lifecycles. Companies went public after operating for only a year or two.
On how this makes it more difficult for underwriters to make sure they are taking companies public:
Because the market was clamoring for these companies, we had to make judgments earlier in companies' lifecycles. We didn't have the luxury of looking at a long track record. Clearly, the market was interested in investing in these companies at a stage when proof of viability was impossible to get.
On the responsibility of Goldman to its investors:
We want to be responsible, we want to be thorough. But at the end of the day, investors are going to make their own decisions.
On how Goldman was careful in taking Net companies public:
We want to really make sure companies are conservatively projecting their financial results. [The Net companies Goldman took public] were able to meet or exceed projections for some extended period of time.
On how investors' attitudes about Net companies have changed over the past year:
The market's willingness to finance these companies really dried up.
On the lessons of the rise and fall of Internet stocks:
Market values are not necessarily proxies for good businesses. That's particularly true when there are new technologies.