At first glance, Goldman Sachs’ purchase of GreenSky, announced in 2021, might have appeared to be the exit many fintech firms dream of. 

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

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 fintech’s stock was down 70% from its peak at the time Goldman announced the takeover, The Wall Street Journal reported. 

Two months prior to the Goldman announcement, GreenSky agreed to refund or cancel up to $9 million in loans and pay a $2.5 million civil penalty to the Consumer Financial Protection Bureau to resolve allegations of “careless business and customer service practices” that allowed merchants and contractors to take out loans without consumers’ consent. 

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.

“We 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,” Goldman CEO David Solomon said in a press release in September 2021.

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 amid mounting losses and growing skepticism over the performance of the consumer-focused platform.

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

A bidder could acquire the company as whole, or the firm’s platform and loans portfolio could be acquired separately, she added. 

“One thing is clear is that the sale will be at a significant loss to the price bought by Goldman Sachs just two years ago,” she said. 

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

“Everybody’s been coming in low, and the Goldman team keeps pushing back, pounding the table about the value of it,” one of the bidders told CNBC.

While Solomon has positioned the sale as the investment bank’s 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.

“This 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,” she said.

Apollo Global Management, Pagaya Technologies and Sixth Street have submitted bids for the fintech, according to Bloomberg. 

Goldman has asked bidders to submit a third round of offers by early this month, sources told the wire service. 

A warning to others

Goldman’s retreat from the retail market means the firm no longer has a place for GreenSky, Solomon told analysts in April.

“We may not be the best long-term holder of this business,” he said.

Goldman’s 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. 

Firms eyeing similar transactions need to assess the cultural alignment of the organizations to ensure value isn’t lost through the deal, she said. Firms also need to align risk appetites and ensure there is an agreed on long-term strategy.

Fintechs shouldn’t count on the perceived security of selling to a financial services giant like Goldman Sachs as a means to navigate tough times, she said.

“Despite 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,” Fuller said.

Goldman’s 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 “down-the-fairway opportunities,” said Greg Cohen, CEO at Fortis, a payment and commerce technology firm.

“For 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,” he said.

More broadly, Goldman’s 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.

"When selling to a large institution, you are always at risk for changes in strategy, which can make you and the company you built irrelevant,” he said. “If 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."