Goldman Sachs is creating a joint venture that will help it capitalize on automotive technology firms while they’re consistently being overvalued on the New York Stock Exchange. Automotive startups have become a hot item, so long as they’re trading on the assumed merits of new technologies, and there’s no shortage of new companies being propped up by established players. The last few years have been a merry-go-round of establishment automakers and financial intuitions investing in startups on the off chance they might have something useful.
Meanwhile, burgeoning electric vehicle companies are using special purpose acquisition firms (aka blank-check companies) to maximize their advantage. Even though some have argued this is being done unfairly, there’s not much accountability in general. The iron could not be more primed for striking if you happen to be one of America’s largest banks.
According to Bloomberg, the investment bank chose San Francisco-based technology banker Chris Buddin and New York-based industrial banker Fausto Monacelli as the co-heads of the automotive offensive.
The venture formalizes a partnership between Goldman’s industrial and technology, media and telecommunications teams that had been collaborating already on deals for years, David Friedland, head of the Americas cross-markets group, said in an interview.
“It will lead to greater collaboration, greater dedication of resources, more efficient execution on opportunities and more internal institutional support,” Friedland said.
Goldman Sachs’ strategy appears similar to the Softbank Vision Fund that has been on a technology buying spree with a clear aim to control certain technologies in the near future. The fund makes strategic investments in companies across the technology sector, with a focus on artificial intelligence, applications, and devices that use sensors to network with other devices or the internet (e.g. smartphones, tablets, home assistants, wearable fitness devices, robots, modern cars). Some of Softbank’s biggest investments have been in the automotive realm and it has become increasingly close with Toyota. The financial entity has a clear interest in buying up businesses pertaining to food delivery, freight and parcel services, online vehicle sales, car sharing, and autonomous technologies.
While Goldman Sachs may have different objectives, seeing another gargantuan financial institution take a similarly strong interest in automobiles makes you wonder. The bank may just be trying to secure investments in a period where technology startups are guaranteed money makers on Wall Street, especially once they’re supported by larger entities. But there’s also a sense that it would like to take control of various business sectors before their respective markets reach maturity.
“After Tesla’s IPO many people believed that it’s lightning in a bottle and it will not happen again because of the capital needs,” Buddin said. “The way that Tesla has grown and is valued gives people faith that there’s room for startups to grow in this sector.”[Image: Goldman Sachs]