NEW YORK -- Venerable Wall Street investment firm Goldman Sachs & Co. said Monday it agreed to buy a minority stake in Wit Capital, an upstart investment bank that conducts its business online.
Goldman Sachs is buying a 22 percent stake in Wit Capital, the firm's fourth investment in a financial services venture focusing on new technologies such as the Internet. Goldman is expected to pay about US$20 million for the Wit stake, after private equity fund Capital Z earlier this month forked over $25 million for a 25.8 percent in the online investment bank.
The deal will pair Goldman Sachs, one of Wall Street's oldest firms with a 130-year history, with one started in 1996 by securities lawyer and one-time beer brewer Andrew Klein. It also combines an investment bank catering to big financial institutions and wealthy individuals with an upstart firm aiming to help small investors participate in stock offerings.
Wit Capital has helped 50 companies go public. It has sold shares through the Internet to subscribers since becoming a broker in September 1997. The firm has hired a slew of heavyweight investment bankers, including former Salomon Smith Barney vice chairman Bob Lessin, and now employs 75 people. Wit, which recently said it would sell $80 million worth of shares to the public later this year, posted an $8.8 million loss on revenues of $2.0 million last year.
Goldman's partners also recently approved a plan to sell a stake in the firm to the public this summer. The firm earned $2.9 billion before taxes and partners' pay on revenues of $8.5 billion last year. Goldman previously has made minority investments in electronic trading systems Archipelago, Optimark, and Brokertec.
"Every major brokerage needs to have an online presence," said Kathleen Smith, the portfolio manager of Renaissance Capital's IPO fund.
The companies said they would cooperate in various areas, including initial public offerings. Their relationship will be nonexclusive.
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