Goldman's Stock Decline Has Wall Street Wondering When It Ends
Goldman may see a “financial hit” of $600 million to $2 billion from the 1MDB scandal, estimates Bernstein analyst.
(Bloomberg) -- Goldman Sachs Group Inc.’s shares fell for a third day as analysts speculated on how long the pain will continue.
The stock dropped 0.5 percent more on Tuesday as investors grappled with the potential fallout from the firm’s involvement in raising money for Malaysia’s scandal-plagued state investment company 1MDB earlier this decade. The shares’ three-day plunge was the worst since August 2011.
The financial impact and reputational damage of the scandal are “nearly impossible to quantify at this point in time,” Keefe, Bruyette & Woods analyst Brian Kleinhanzl wrote in a note Tuesday. “The ultimate question is who knew what and when regarding 1MDB and that question remains open-ended for now.”
The bank -- which hasn’t been charged with wrongdoing -- has said the investigation could lead to significant fines. Bernstein analyst Christian Bolu estimated Goldman may see a “financial hit” of $600 million to $2 billion from the 1MDB scandal, which would be “meaningful” but “ultimately manageable” for the firm.
Bolu said he wasn’t concerned about the firm pausing its stock buyback program, but does wonder about its long-term appetite to chase deals in emerging markets.
Goldman’s shares are down 20 percent this year and investors may have to wait for more clarity on just how painful the consequences will be.
“We need more facts to come out,” Janus Henderson Investors portfolio manager Marc Pinto said in an interview Tuesday.
To contact the reporters on this story: Claire Ballentine in New York at cballentine@bloomberg.net;Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub
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