Goldman Sachs is reportedly in advanced talks to dump money-losing fintech unit GreenSky at a significant loss — after embattled CEO David Solomon paid more than $2 billion to buy the home improvement lender.
The Wall Street investment banking giant held exclusive negotiations with a consortium led by investment firm Sixth Street Partners that would value GreenSky at about $500 million, according to The Wall Street Journal.
The consortium, which includes Pacific Investment Management and KKR & Co, prevailed over a rival bid from private equity firm Apollo Global Management in an auction for GreenSky, the sources told the outlet on Tuesday.
Goldman agreed to buy GreenSky in an all-stock deal valued at $2.24 billion in September 2021 as it tried to expand into the consumer lending business.
The deal value had dropped to $1.7 billion by the time the acquisition was completed in March 2022 as Goldman’s shares slid.
The sources requested anonymity ahead of an official announcement. Goldman Sachs declined to comment, while representatives for the investment firms either declined to comment or did not respond to requests for comment.
GreenSky’s divestment is part of Goldman’s broader retrenchment from its consumer business, which has lost $3 billion in the last three years. It also offloaded the bulk of its unsecured consumer loans, after halving this kind of lending last year.
Goldman acquired GreenSky at the height of the COVID-19 pandemic, which kept consumers at home and prompted many of them to splash out on renovations.
GreenSky’s business weakened as the pandemic subsided, and high interest rates and soaring prices for building materials have weighed on home-renovation lending.
Goldman took a $504 million writedown on GreenSky in its second-quarter earnings, and analysts have warned further charges could be necessary.
Solomon had spearheaded the GreenSky acquisition in the hopes that the investment bank could expand its clientele beyond high-end and ultra-wealthy customers.
Solomon reportedly pushed for the deal over the objections of skeptical partners, according to The Journal.
Last month, Goldman unloaded another unit whose acquisition was spearheaded by Solomon. The bank sold off its personal financial management business to rival consultancy firm Creative Planning.
Earlier this month, Solomon, whose leadership has reportedly been called into question by the bank’s rank-and-file as well as by senior partners, told CNBC it was “not fun” to be criticized through the press.
“I don’t recognize the caricature that is painted of me, and when I talk to colleagues and I talk to clients, they don’t recognize it either,” he said.
“But that doesn’t stop me from reflecting on anything that’s said, and I always try to think about how I can do better.”
Goldman’s profit slumped 60% in the second quarter, missing estimates, as writedowns on its consumer businesses and real estate investments weighed on earnings.
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