Why the Arm and Instacart IPO Market Testing Puts Goldman Sachs in the Spotlight

The return of large tech IPOs this week after a prolonged drought isn’t just a test of investors’ appetite for risky new offerings — it’s a key moment for Wall Street’s top advisor, Goldman Sachs.

Chip designer Arm is expected to begin trading Thursday in the year’s biggest listing. Delivery firm Instacart and marketing automation platform Klaviyo are expected to list as soon as next week.

While they each operate in vastly different parts of the tech universe, the companies have one important thing in common: Goldman is a key advisor.

The stakes are high for everyone involved. Last year was the slowest for American IPOs in three decades, thanks to sharply higher interest rates, rising geopolitical tensions and the hangover from 2021 listings that fared poorly. Successful IPOs from Arm and others will boost confidence for CEOs waiting on the sidelines, and activity there would help revive other parts of finance including mergers and financing.

That would be meaningful for Goldman, which is more dependent on investment banking than rivals JPMorgan Chase and Morgan Stanley. Amid the industry’s slump, Goldman has suffered the worst revenue decline this year among the six biggest U.S. banks, and CEO David Solomon has contended with internal dissent and departures tied to strategic errors and his leadership style.

“This is the core of the core of what Goldman Sachs does,” Mike Mayo, Wells Fargo banking analyst, said in a phone interview. “Expectations are high, and they’re likely to meet those expectations. Should they fall short, there will be far more questions than anything we’ve seen so far.”

Goldman is lead-left advisor on Instacart and Klaviyo, meaning their bankers drive decisions, coordinate other banks and typically earn the biggest portion of fees. On Arm, Goldman shares top billing with JPMorgan, Barclays and Mizuho. Goldman also was named the deal’s allocation coordinator.

But the sought-after title of lead advisor comes with added scrutiny if the deals flop.

If shares of Arm or the other two IPOs fail to trade for a premium to the list price in coming weeks, dark clouds could form over the nascent market rebound. For Goldman, perceptions of a bungled process would feed doubts about the company under Solomon.

Unlike the bank’s unfortunate foray into consumer finance, Goldman’s position atop Wall Street’s league tables hasn’t budged. The bank has actually gained share in advisory and trading since Solomon took over in 2018.

But even in its traditional stronghold, there is room for cracks. Goldman is being investigated for its role advising Silicon Valley Bank in the days before its collapse.

While Arm’s offering is reportedly seeing high demand, there are nagging doubts about the company’s valuation, its large exposure to China and its ability to ride the artificial intelligence wave. The SoftBank-owned company’s valuation has waxed and waned in recent weeks, from as high as Follow Google News