May 19, 2024

DealBook: Goldman’s Shares Drop Sharply After Downgrade

Goldman SachsBrendan Mcdermid/Reuters

Shares of Goldman Sachs are under pressure following a scathing report from an outspoken industry analyst.

On Thursday, Richard X. Bove of Rochdale Securities slashed his price target on the investment bank’s shares and changed his rating to sell, saying that pressure was building for the Justice Department to take action against Goldman Sachs.

“It now appears that the pressure on the Justice Department to bring a criminal lawsuit against Goldman is building to a high pitch,” Mr. Bove said in the report.

“The new Matt Taibbi article in Rolling Stone magazine is another all-out attack on the company. However, this time the attack is backed by a 650-page Senate report signed by both a Democrat and a Republican,” Mr. Bove wrote, referring to a recent report by the Permanent Subcommittee on Investigations that concluded Goldman had misled clients about mortgage-linked securities.

Senator Carl Levin, who headed up the Congressional inquiry, has sent his findings to the Justice Department to figure out whether executives broke the law.

Such was the topic of the latest piece by Mr. Taibbi, who famously called Goldman Sachs a “vampire squid” in a 2009 article on the bank. His recent article was titled: “The People vs. Goldman Sachs. A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges.”

Goldman’s stock was down more than 3 percent in early trading on Thursday. It is currently trading around $142. It closed 2010 at $168.16.

Mr. Bove had a buy rating on Goldman just a month ago, with a price target of $188. On April 19, he reduced his outlook to neutral after the firm reported first-quarter earnings. His current price target is $120. Still, most Wall Street analysts consider Goldman a buy.

“It is clear to outsiders that there must be a major restructuring of the company at the board and executive suite levels or Congress will not be satisfied. The company continues to fight such a change,” Mr. Bove wrote in his latest note to investors. “This is not a good investment. The stock should be sold. When the government/company conflict is resolved, then one can review what the structure of Goldman is and rethink reinstituting positions.”

Goldman had no immediate comment.

Richard Bove’s Sell Rating on Goldman Sachs

Goldman Sachs Report by Richard Bove

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