Goldman Sachs Creates Private Stock Exchange for Unregistered Securities, Clients with $100 Million Minimum
May 24th, 2007This is an absolutely astonishing development! People will be able to make careers out of untangling this octopus, if, of course, they’re willing to take their lives in their hands to investigate what is actually happening within this den of villainy, and the actual sources of the money involved.
When you consider what goes on with regulated, public companies and the public equity markets… You just can’t believe the nonsense.
But this…
This is extremely weird.
What’s that, Treasury Secretary Henry M. Paulson is a former Goldman Sachs chief executive!!!???
That’s right.
The money is so dirty now, the gains so ill-gotten, that the most diabolical of ALL Wall Street firms needs to create a PRIVATE exchange because the existing bogus securities laws (WorldCom, Enron, blah blah) are too cumbersome and time consuming!?
Watch this space; if you dare.
Via: Wall Street Journal:
Goldman Sachs Group Inc. ranks as the most profitable securities firm on Wall Street — reflecting its mastery of trading on the world’s public markets.
Now Goldman is turning that franchise on its head, creating its own private system to trade the stocks of companies that don’t want the scrutiny and regulatory burdens of going public.
The new system, GS TRuE — short for Goldman Sachs Tradable Unregistered Equity — was announced two weeks ago and made its debut on Monday with an $880 million sale of a 15% stake in Oaktree Capital Management LLC, an alternative-investment manager.
It is the first of several new, private exchanges like these being considered by Wall Street firms and others. Nasdaq is also planning its own new market for smaller, unregistered securities.
These markets will generally be closed to individual investors. For instance, Goldman’s market is open only to large institutional investors with assets of more than $100 million. That is because the stocks traded on GS TRuE aren’t registered with the Securities and Exchange Commission and issuers aren’t subject to SEC regulations designed to protect individual investors.
It represents the latest step in the creeping exclusion of individual investors from a growing proportion of financial-market activity. For instance, giant private-equity firms are busy buying public companies and delisting them from stock exchanges. The growing importance of hedge funds — which are generally limited to wealthy investors, institutions and endowments — also excludes individuals.
The new system is “a manifestation of the growth of private-equity relative to public equity,” said Jay Ritter, a finance professor at the University of Florida in Gainesville, pointing to the record-setting pace of private-equity buyouts of public companies recently. (For more on Goldman’s product, see Breakingviews column.)
Traditional mutual funds — one of the main investment tools at the disposal of individual investors — are also limited in the amount of unregistered securities they can buy or sell. Hedge funds, by contrast, have more freedom to buy unregistered stocks and bonds.
Indeed, bankers and capital-markets executives at rival firms say that, at GS TRuE’s debut, hedge funds were prominent among buyers for the issue by Los Angeles-based Oaktree.
Some investor advocates criticized the trend of selling more securities faster with less disclosure. “It becomes much more of a buyer-beware marketplace with little regulatory oversight or protection,” said Steven B. Caruso, a New York lawyer who represents investors in disputes with Wall Street.
Goldman’s move partly reflects a business-community backlash against increased regulation of public-company accounting practices — a favorite theme, as it happens, of Treasury Secretary Henry M. Paulson Jr., who is also a former Goldman chief executive.
Wall Street executives said the market offers an alternative to companies that don’t want to wait for regulators to approve their financial disclosures needed for an initial public offering, which can take 90 days or more.
They also said it offers a haven for firms that don’t want to be subject to what Oaktree described as “the full panoply of regulations applicable to publicly traded companies in the United States.”
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This has actually been going on informally for decades. I used to work for financial firm whose products were essentially mutual fund analogs of private equity, available only to large institutional investors.
So, while I’m as paranoid as the next Cryptogon reader, I’d have to say that this is a formalization of “business as usual”. But I’ll agree that it is a tacit admission by the PTB that they’re not even going to pay lip service to the rules anymore.
Ah yes, a private backroom in the financial casino, for the exclusive high rollers. The front room is just for suckers, after all. Color me surprised.
IMO, this is about raiding the multibillion dollar pension funds, the largest capital pool that (in theory) still belongs to middle class boomers. Just as the pension funds ate the lower tranches of the subprime CDOs, they are now going to be stuffed full of “unregistered equities” by GS. When the boomers discover they will retire as paupers, they will quietly kill themselves off with alcohol and suicide just like Russia’s WWII heroes did in the 1990s.
The real movers and shakers don’t need a dodgy new GS stock exchange, they can do private equity deals. (Cerberus* buys Chrysler)
*Cerberus: a three headed dog who guarded the gates of Hades
@ slomo
This isn’t private equity. This is PRIVATE EQUITY. We’re not talking about a few million in seed capital here. The first issue out of the gate on this thing was $880 million.
@ Alek
Yeah, and Project HYDRA is going to keep the lights on.
https://cryptogon.com/?p=756
The Department of Homeland Security will fund up to $25 million for the nearly $40 million superconductor cable, it calls “Project Hydra,†after the mythical Greek monster that grew back multiple heads when one was severed.
I’m wondering if this is how They’re going to pull more of the drug money in to finance the day to day debt operations.
Now that the Chinese are ready to take their 1.2 trillion ball and go… Where? Maybe they’ll play on this thing too, but it seemed like they’d had enough of dollar denominated assets.
I want to see a Blackwater USA offering on there. That would be the icing on the cake.
Ditto what slomo said. Just think of it as the private baccarat table as seen in a Bond movie. Only the big fish are invited.
But Ozzy…Man!… Whats to keep these rat bastards from dipping into the “little mans” cookie jar to fund their high-rollin’ shenanigans? The SEC? LOL! Thats like asking your old crippled uncle to wheel-chair his way after a bunch of shyster sprinters. Ain’t gonna catch them!
Well, this was serious seed funding and pre-IPO stuff, with some big names. But I’ll admit that we just ate the table scraps.
I mean, I’m not happy about it either, but I think it’s really part of a larger trend: institutionalizing the informal corruption that has been going on for half a century.
The weekly cycle is becoming glaringly and suspiciously repetitive.
On Monday a lousy set of figures comes out and there’s either a pull-back or a sudden drop, on Tuesday a few people start to point out the upside, no matter how silly, of that news and the markets rally slightly, on Wednesday investors start to worry again and the market stalls, on Thursday some kind of “unexpectedly good numbers” come from one of the big financial groups(or some instrument under their control) – including Goldman Sachs, JP Morgan, The US Federal Reserve Bank (a private bank), or the US Treasury – and the market rebounds to new highs. Friday is the danger day, if bad news comes out, they have all weekend to chew on it, and, watch world markets respond before they can.
At some point in the very near future one of the big cards will domino us all into the last Great Depression. The longer they manipulate the markets the worse it’s going to be.
The bubbles are banging against the edge of resource depletion and limits to growth on every level are sprouting like weeds; oil, metals, corn (food), fresh water, gas and NGL’s, quality coal.
The carrying capacity of the planet is soon going to decline very rapidly and past mythical economic models that rely on unimpeded infinite growth will be seen to be the deadly error they were always going to be. There will be no way to manipulate anything that looks like a share market, national economy or even an individual in the bleak near-future that awaits us all.
They need to come up with a new acronym. Something like the following:
GS SCRuE or GS TRuE Screw
This just supports my theory that if you put three stock brokers on a desert island with a printing press, they will all get rich.
The fund should have a motto. How about,
1. Money is like incest, it’s best kept in the family.
2. Rich or Poor, it’s good to have money.
Let them have their private market.
If two criminals are killing each other are you going to step up and stop the fight? Not me.
Money is never made or lost, it simply changes hands.
On the contrary, money is now frequently made, and rampant inflation & market bubbles are the direct result.
But yes, it is all a net sum game, with reverse Robin-hood Ponzi-style wealth redistribution as the end result.
What excellent news and I suppose they’ll be looking for long term investment opportunities to pump the money back into a revised and revisionary System under Enlightened NeuReal Management.
That would be yet another Physical Market for them to Create and Control and all done Virtually…. if they are a Head in the Greatest of UltiMate Games