Goldman Sachs Invests in Wit Capital

Wit Capital seems poised to become an online trading powerhouse. The online investment bank announced Monday that Goldman Sachs will make a minority equity investment in Wit Capital.

Goldman Sachs will purchase stock and warrants representing approximately 22% of Wit Capital’s outstanding common stock without including shares that will be issued in Wit Capital’s planned initial public offering.

Both Companies Plan IPO

Under the terms of the non-exclusive deal between Wit Capital and Goldman Sachs, the two companies will work together in areas including initial public offerings.

“We believe that through this relationship we can combine Goldman Sachs’ banking and institutional expertise with Wit Capital’s online distribution to provide issuers stronger execution of their equity offerings,” said Ronald Readmond, president and co-CEO of Wit Capital.

The deal has an interesting wrinkle in that both companies are currently planning their own IPOs. Wit Capital recently filed for an IPO to raise as much as $80 million (US$). Goldman Sachs is planning to go public later this year and raise as much as $3.45 billion.

Many Options for Members

Wit Capital, which launched in September of 1997, provides a variety of trading options for its more than 10,000 members. In addition to offering the typical services of an online broker, the company offers a limited number of shares of IPOs on a first-come, first-served basis for its clients. Wit Capital has distributed shares of many recent high-profile Internet IPOs, including CBS Marketwatch (Nasdaq: MKTW), iVillage (Nasdaq: IVIL) and the Mining Company (Nasdaq: MINE).

Wit Capital, which hired star Internet stock analyst Jonathan Cohen away from Merrill Lynch, also gives its members opportunities to invest in private placements and public venture capital.

“Wit Capital has pioneered the integration of the Internet and the capital markets, and both investors and corporate issuers are benefiting as a result,” said Henry M. Paulson, Jr., co-chairman and CEO of Goldman Sachs. “We look forward to working with Wit Capital to provide our clients with better and more integrated investment banking services than exist in the marketplace today.”