Goldman is officially the sick man of Wall Street today. Its shares are down 5 per cent on the day while the rest of the market, including Morgan Stanley (the last remaining comprable), are rallying. Its lost 17 per cent for the week, almost doubling the decline in Morgan Stanley’s shares. The monthly chart is even uglier: down 33%, making its performance more than three times worse than Morgan Stanley’s.
A lot of this downward pressue has likely come from a series of analyst comments predicting that Goldman will post a loss for the quarter. While the “consensus” estimates still call for Goldman to earn $1.62 per share in the fourth quarter, four influential analysts are now saying that the tide has turned against Goldman.
- Morgan Stanley analyst Patrick Pinschmidt forecast a loss of $ 1.09 a share
- UBS analyst Glenn Schorr sees a loss of 40 cents a share
- Merrill Lynch’s Guy Moszkowski projects a loss of 49 cents a share
- JPMorgan Chase & Co. analyst Kenneth Worthington said today that Goldman could lose 58 cents a share
Nearly every one of these analysts agrees on what is driving losses at Goldman: it’s equity exposure. Goldman has a large private equity and principle investment portfolio, and those investments are expected to have suffered with the huge decline in the stock market. While Goldman’s peers were crushed by the credit markets, which Goldman managed to sail through with minimal damage, it now seems that its above average equity exposure has put the firm in peril.
Of course, this is Goldman we’re talking about. So people are already wondering if the investment bank may have developed some kind of super secret hedging strategy.
But perhaps the wildest theory floating around is that Goldman’s partners may take their firm private. It’s something people have been pondering ever since Goldman’s slide began. Scott Rothbort ran that particular flag up his pole this morning:
There is simply no reason why GS in my mind would want to remain a public company at this juncture.
In order to go private, the price paid to current shareholders would have to be significantly higher. With a current market value of $30 billion, even paying $50 billion for the company would not cost that much, as there is still a good chunk of the company that remains in employee and former partners’ accounts. Those individuals would likely become part of the new private company. Furthermore, with the U.S. government standing ready to inject capital into GS, there is ready financing available to make the deal happen.
A few calls to senior people at Goldman produced the usual response: they hadn’t heard anything about this, but anything could happen, and they’d be buyers if someone put together the deal. Generally, they’re sceptical, however, that something like this is in the works.
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