Goldman shares rise as rivals line up to take stakes in bank's 'Simon' investing app
- J.P. Morgan Chase, Barclays, HSBC Holdings, Credit Suisse, Wells Fargo and Prudential Financial were in advanced talks to take stakes in the business, valuing Simon at about $100 million, a source familiar with the matter said.
- Structured notes have gained in popularity with investors as an alternative to bonds.
- Morgan Stanley and Bank of America announced their backing of a rival structured notes sales platform called Luma in July.
Goldman Sachs shares jumped 2 percent after word it has lined up rival banks to take stakes in its three-year-old app devoted to selling complex investment products.
The Wall Street firm has been mulling a spinoff of the app, called Simon, for some time. J.P. Morgan Chase, Barclays, HSBC Holdings, Credit Suisse, Wells Fargo and Prudential Financial were in advanced talks to take stakes in the business, valuing Simon at about $100 million, a source familiar with the matter said. The Wall Street Journal first reported the talks Wednesday.
Simon was developed as a web-based operation to sell complicated bond-like investments to retail investors through brokers. The idea was to get rival banks to sell the investment products, called structured notes, to retail brokers through the app, but Goldman's ownership kept competitors at bay. Getting outside owners on board was seen as a way to boost the use of the app.
Goldman has been opening its home-grown technology to outsiders for a few years. Five years ago, it sold a majority of its REDI trading technology, which is used by hedge funds and other money managers, to a group of banks using a similar rationale.
Structured notes have gained in popularity with investors as an alternative to bonds. Morgan Stanley and Bank of America announced their backing of a rival structured notes sales platform called Luma in July. WSJ cited data that $55 billion of the investments were sold in the U.S. last year, up from $37 billion in 2016.