{"id":13284,"date":"2023-09-07T00:00:00","date_gmt":"2023-09-07T00:00:00","guid":{"rendered":"https:\/\/fortispay.com\/in_the_media\/goldmans-strategy-retreat-leaves-greensky-in-limbo\/"},"modified":"2023-09-07T00:00:00","modified_gmt":"2023-09-07T00:00:00","slug":"goldmans-strategy-retreat-leaves-greensky-in-limbo","status":"publish","type":"in_the_media","link":"https:\/\/fortispay.com\/in_the_media\/goldmans-strategy-retreat-leaves-greensky-in-limbo\/","title":{"rendered":"Goldman\u2019s strategy retreat leaves GreenSky in limbo"},"content":{"rendered":"\n

The\u00a0installment-lending fintech, which Goldman is looking to sell,\u00a0faces an uncertain future as the investment bank distances itself from an ambitious retail strategy.<\/em><\/p>\n\n\n\n

At first glance, Goldman Sachs\u2019\u00a0purchase of GreenSky<\/a>, announced in 2021,\u00a0might have appeared to be the exit many fintech firms dream of.\u00a0<\/p>\n\n\n\n

Goldman, one of the world\u2019s largest investment banks, bought the installment-lending fintech in a $1.73 billion all-stock deal<\/a>, completed last year, in an effort to combine the firm\u2019s products with Goldman\u2019s consumer-banking platform, Marcus. <\/p>\n\n\n\n

The purchase came at a crucial time for GreenSky. Navigating an increase in loan defaults both before and during the COVID-19 pandemic, the Atlanta-based\u00a0fintech\u2019s stock was down 70% from its peak at the time Goldman announced the takeover,\u00a0The Wall Street Journal reported<\/a>.\u00a0<\/p>\n\n\n\n

Two months prior to the Goldman announcement, GreenSky agreed to refund or cancel up to $9 million<\/a> in loans and pay a $2.5 million civil penalty to the Consumer Financial Protection Bureau to resolve allegations of \u201ccareless business and customer service practices\u201d that allowed merchants and contractors to take out loans without consumers\u2019 consent. <\/p>\n\n\n\n

But Goldman saw potential in GreenSky, and counted on the fintech to help it hit ambitious targets for Marcus, the retail platform it launched in 2016.<\/p>\n\n\n\n

\u201cWe have been clear in our aspiration for Marcus to become the consumer banking platform of the future, and the acquisition of GreenSky advances this goal,\u201d Goldman CEO David Solomon said in a press release<\/a> in September 2021.<\/p>\n\n\n\n

But just two years later, Goldman is looking to offload GreenSky, a move that comes as the investment bank scales back its ambitions for Marcus<\/a> amid mounting losses and growing skepticism over the performance of the consumer-focused platform.<\/p>\n\n\n\n

The pivot means GreenSky faces an uncertain future as it awaits a buyer, said Jennifer Fuller, U.S. financial services lead at PA Consulting.<\/p>\n\n\n\n

A bidder could acquire the company as whole, or the firm\u2019s platform and loans portfolio could be acquired separately, she added. <\/p>\n\n\n\n

\u201cOne thing is clear is that the sale will be at a significant loss to the price bought by Goldman Sachs just two years ago,\u201d she said. <\/p>\n\n\n\n

Bids for GreenSky have come in lower than Goldman Sachs was hoping<\/a>, according to a June report, spurring the prospect that the bank may have to take a write-down on the sale.<\/p>\n\n\n\n

\u201cEverybody\u2019s been coming in low, and the Goldman team keeps pushing back, pounding the table about the value of it,\u201d one of the bidders\u00a0told CNBC<\/a>.<\/p>\n\n\n\n

While Solomon has positioned the sale as the investment bank\u2019s effort to find a better long-term holder for GreenSky, the significant drop in price indicates a lower market value of the fintech since its acquisition, Fuller said.<\/p>\n\n\n\n

\u201cThis will likely reflect the need to navigate the fallout from this high-profile endeavor including the reputational damage from the CFPB fines, poor consumer practices and oversight which failed to protect vulnerable customers,\u201d she said.<\/p>\n\n\n\n

Apollo Global Management, Pagaya Technologies and Sixth Street have submitted bids for the fintech, according to Bloomberg<\/a>. <\/p>\n\n\n\n

Goldman has asked bidders to submit a third round of offers by early this month, sources told the wire service. <\/p>\n\n\n\n

A warning to others<\/h3>\n\n\n\n

Goldman\u2019s retreat from the retail market means the firm no longer has a place for GreenSky, Solomon told analysts<\/a> in April.<\/p>\n\n\n\n

\u201cWe may not be the best long-term holder of this business,\u201d he said.<\/p>\n\n\n\n

Goldman\u2019s acquisition and subsequent sale of GreenSky should serve as a reminder to other banks and fintechs to ensure a clear focus on how a potential deal aligns to the existing value proposition, brand and strategy of the firm, Fuller said. <\/p>\n\n\n\n

Firms eyeing similar transactions need to assess the cultural alignment of the organizations to ensure value isn\u2019t lost through the deal, she said. Firms also need to align risk appetites and ensure there is an agreed on long-term strategy.<\/p>\n\n\n\n

Fintechs shouldn\u2019t count on the perceived security of selling to a financial services giant like Goldman Sachs as a means to navigate tough times, she said.<\/p>\n\n\n\n

\u201cDespite being bought by a large, established player with deep pockets, the poor performance of GreenSky, compounded by poor consumer practices and regulatory fines, has quickly changed the fortunes of the company,\u201d Fuller said.<\/p>\n\n\n\n

Goldman\u2019s refocus on ultra-high-net-worth individuals shows that in a time of market and financial stress, firms will return to their core competencies and \u201cdown-the-fairway opportunities,\u201d said Greg Cohen, CEO at Fortis, a payment and commerce technology firm.<\/p>\n\n\n\n

\u201cFor Goldman, this is a natural exit of a segment they ran into during the free money rush and decided to exit as the world pivoted,\u201d he said.<\/p>\n\n\n\n

More broadly, Goldman\u2019s shift in strategy is a prime example of the risk fintechs face when selling to large banks, said Solomon Lax, a former investment banker and venture capitalist who is now CEO of online lender Revenued.<\/p>\n\n\n\n

\u201cWhen selling to a large institution, you are always at risk for changes in strategy, which can make you and the company you built irrelevant,\u201d he said. \u201cIf you are in it for the money, then by all means sell. If you are either mission- or legacy-driven, it rarely accomplishes what you set out to achieve.\u201d<\/p>\n\n\n\n

By Banking Dive | https:\/\/www.bankingdive.com\/news\/goldman-sachs-greensky-sale-marcus-fintech-banking-solomon\/692979\/ <\/p>\n","protected":false},"featured_media":13285,"template":"","class_list":["post-13284","in_the_media","type-in_the_media","status-publish","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/fortispay.com\/wp-json\/wp\/v2\/in_the_media\/13284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fortispay.com\/wp-json\/wp\/v2\/in_the_media"}],"about":[{"href":"https:\/\/fortispay.com\/wp-json\/wp\/v2\/types\/in_the_media"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fortispay.com\/wp-json\/wp\/v2\/media\/13285"}],"wp:attachment":[{"href":"https:\/\/fortispay.com\/wp-json\/wp\/v2\/media?parent=13284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}