NEW YORK — Wall Street banks led by JPMorgan Chase and Morgan Stanley stand to make a combined $120 million on General Motors’ initial public offering. If it weren’t for Goldman Sachs Group, they could have made four times as much.
In a pitch to the Treasury in May, Goldman Sachs offered to accept a fee of 0.75 percent, according to people with direct knowledge of the matter. That’s a fraction of the 3 percent banks typically charge on the largest IPOs and well below the 2 percent offered by Bank of America and other banks that presented to the Treasury, said the sources, speaking anonymously.
Goldman Sachs, which had just been sued for fraud by federal regulators and has ties to GM competitor Ford, didn’t get a top role in the IPO. The government imposed the fee pitched by Goldman Sachs president Gary Cohn and his five-person team on all underwriters, angering the banks, the people said.
“The fact the other banks are furious at Goldman is not surprising,” said Samuel Hayes, a professor emeritus of investment banking at Harvard Business School in Boston. “They feel it gave the government a real lever to force down fees on the underwriters. But the deal still has a lot of marquee value.”
Banks involved in the deal — which sets the stage for the federal government to begin selling off its majority stake in the automaker — include lead managers JPMorgan and Morgan Stanley, as well as Bank of America and Citigroup, among others. Some banks made different concessions in their pitches to the Treasury. Bank of America and Credit Suisse Group offered to use some of their fees to buy GM vehicles or to subsidize employee purchases of GM cars and trucks, according to the sources.
Goldman Sachs spokeswoman Andrea Rachman and spokespeople for the other banks declined to comment. Treasury spokesman Mark Paustenbach also declined to comment.
Goldman Sachs will have a role in the offering, as will Credit Suisse, said the people. Five banks pitched GM and the Treasury on May 19 in Washington, and non-U.S. lenders made presentations in early June. All sent top executives, such as JPMorgan chief executive Jamie Dimon and John Mack, chairman of Morgan Stanley.
