Goldman Sachs CEO Cautions on Market Sentiment Following Google’s $80B Capital Raise

Goldman Sachs chief executive David Solomon says he’s starting to see signs of froth in the markets after seeing how investors reacted to Google parent Alphabet’s follow-on equity deal.

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In an interview at the Economics Club of New York, Solomon says he’s looking at Alphabet’s $80 billion capital raise as a case study for the current state of market sentiment.

According to Solomon, the stock is trading up quite well during the “largest follow-on equity deal that’s ever been done,” leading him to believe that investor risk appetite is on the up and up.

“This is the first actual concrete data point for bringing something of this scale, and it’s encouraging. And so, I think there’s plenty of liquidity in the system if the world continues to remain as optimistic, and I do think we’re in a period. And I know when I say this, I’m pausing for a second to say it, but I know when I say it, it will get quoted. But I think it’s definitely true. It’s something for us to reflect on.

We are definitely in a moment where there’s more greed than there is fear.”

Solomon also says the market can absorb deals at the scale of Alphabet’s offering because investors have made a lot of gains in the stock market.

“There’s also unprecedented liquidity and wealth in the markets to absorb some of this. These things also create a virtual flywheel because you’ve got a lot of people that have made a lot of money at a bunch of these companies, and they’re going to be monetizing and reinvesting that into the system, into other things, and paying taxes, by the way, on those gains. And so, there is a virtuous ecosystem, in the context of this, too, that should support it. But it is unprecedented.”