Goldman undercuts rivals in GM IPO as it loses top role

Wall Street banks led by JPMorgan Chase & Co and Morgan Stanley stand to make a combined $120 million on General Motors Co’s initial public offering. If it weren’t for Goldman Sachs, they could have made four times as much.

In a pitch to the US Treasury in May, Goldman Sachs offered to accept a fee of 0.75 per cent, according to people with direct knowledge of the matter. That’s a fraction of the 3 per cent banks typically charge on the largest IPOs and well below the 2 per cent offered by Bank of America and other banks that presented to Treasury, said the people, speaking anonymously because the matter is private.

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 at Harvard Business School in Boston.