Goldman Sachs has a reputation for consistently holding the winning lottery ticket numbers. But it got rid of the ticket that is poised to be one of this year’s biggest payoffs.
The New York Times reports that in 1999, the Wall Street bank was among the first investors in Alibaba Group, the Chinese e-commerce business, injecting $3.3m in what was then little more than a scrappy start-up operating out of its founder’s apartment in Hangzhou.
But as Alibaba Group prepares to sell its stock to the public for the first time, in one of the biggest and most eagerly anticipated initial public offerings in years, Goldman Sachs will not be among the investors standing to make mind-bending sums.
It sold all of its stake in Alibaba by early 2004 — for $22m, or nearly seven times its original investment. In comparison, some of the early investors who bought out Goldman Sachs’s stake have since made as much as 30 times their original investments as the company’s value has ballooned exponentially.
For venture capitalists who make early calls on risky bets, it is all part of the game: You win some, you (comparatively) lose some. And in its defence, one former Goldman Sachs employee said, the bank still made a profit on its investment. It is also among six banks that are underwriting the I.P.O.
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