Goldman Sachs's worst week. At least so far.
Goldman Sachs wrapped up its terrible week today by watching shares of its stock lose 9.4 percent of their value, which translates to a one-day loss in company value of $8.1 billion. Yes, $8.1 billion. Yesterday, the company was worth $86 billion. Today, it is worth $78 billion.
That's a haircut.
Goldman started this week prepping for the Tuesday testimony of its top executives before a Senate committee and dealt with the mild embarrassment associated with the company's release of personal e-mails from trader Fabulous Fabrice Tourre to his girlfriend in 2007. Those discussed how Tourre felt about putting together the Abacus investment vehicle that prompted the SEC to charge Goldman and Tourre with fraud, which Goldman denies.
Tuesday brought the numbing 11-hour hearing that concluded with Goldman chief executive Lloyd Blankfein and committee Chairman Carl Levin (D-Mich.) going at it like Walter Matthau and Jack Lemmon in "Grumpy Old Men." Except in that film, the two old guys actually liked each other.
Even with the SEC civil complaint, Wall Street sentiment was strongly in Goldman's quarter. The markets experienced a broad sell-off during the congressional battering, with most stocks losing value -- except for Goldman. On a day when all three major indexes closed down at or more than 2 percent, shares of Goldman closed up seven-tenths of 1 percent. Goldman was still the gold standard of Wall Street investment banks went the sentiment, and, besides, the SEC's case looks pretty weak.
On Thursday night, my colleague Zach Goldfarb reported that the SEC civil complaint had been referred to the Justice Department to see if it was interested in bringing criminal charges against Goldman.
A criminal case is something very different from a civil complaint. And on Friday, The Post reported that, yes, Justice had decided to open a criminal case on Goldman.
On Friday, Goldman got caught up in a broad market sell-off. The Dow closed down 1.4 percent, the broader S&P 500 closed down 1.7 percent and the tech-heavy Nasdaq closed down 2 percent.
But you can't blame the sell-off for Goldman's Friday woes. The stock dropped 9.4 percent, turning its its worst day in a long time. Standard & Poor's analysts have downgraded Goldman shares to "Sell" from "Hold" and lowered the target price by a whopping $40 to $140. The stock closed today at $145.20, so that means they think Goldman's got further to fall.
Blankfein said at the time of the SEC charge and repeated again on Tuesday that the day the SEC charge landed was one of the worst of his life.
He could have a few more ahead.
Depending on how these twin charges go -- the civil one at the SEC and the criminal one at Justice -- Goldman stock could be in for a bumpy ride the next several months. There's no doubt that if you're two companies and you want to merge, Goldman is still going to be your first stop to do the deal -- the firm's reputation for having the best and brightest is too strong and has been around too long.
But perception and trust matter a great deal on Wall Street. (Ironically, you might say.) And if Goldman continues to be surrounded by static -- even if nothing illegal is proved -- then that becomes a material adverse effect, as the bankers say, on Goldman.
And what of Blankfein? He's still regarded as the brightest mind on the Street (don't tell Jamie Dimon!) but, as one analyst pointed out, he's gotten bigger than Goldman and that's something Goldman never wants. There's a reason why it doesn't have its name on the outside of its building.
This story is so not going away.
Follow me on Twitter at @theticker.
April 30, 2010; 5:00 PM ET
Categories: Corporations , The Ticker , Wall Street | Tags: Business, Carl Levin, Goldman Sachs, Lloyd Blankfein, SEC, Standard & Poor, United States Senate, Wall Street
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