« Does a lousy record help the Nets go green? | Main | And has the Atlantic Yards arena site been assessed? Not that I've been told »
November 11, 2008
Goldman Sachs tilts toward losses
Crain's NY Business
By Aaron Elstein
We are not certain how the financial condition of Goldman Sachs might affect the financing of Bruce Ratner's new arena for the Nets, except to say that the company is supposed to issue and find buyers for the triple tax-exempt arena bonds, if and when the legal encumberances to the project are finally cleared.
When it unveils its fourth-quarter results next month, Goldman Sachs Group Inc. is expected to post its first loss since going public in 1999. As investors brace for bad news, its stock has sunk by 25% in the past week alone, including a 10% drop on Monday morning. The shares are now down 67% so far this year—only marginally better than peers Merrill Lynch & Co. and Morgan Stanley.
Barclays Capital analyst Roger Freeman on Monday added to the gloom by forecasting Goldman would post a loss of $2.50 a share, or about $1 billion, due to losses in private-equity investments and real estate. Mr. Freeman had been forecasting a profit of about $1.1 billion. Other analysts predict substantial withdrawals from Goldman’s asset management unit, which invests heavily in hedge funds. Trading remains dormant in all but the safest securities.
Preparing for tougher times, Goldman last week shed about 10% of its 32,600-employee workforce, including prominent research analysts Bill Tanona, who covered financial institutions; newspaper analyst Peter Appert; and General Electric analyst Deane Dray. Up to another 7,000 job cuts loom as Goldman pares costs to match revenues which are expected to fall 35% this year, according to Thomson Reuters, while profits could plunge by 55%.
To date, Chief Executive Lloyd Blankfein has deftly steered his firm through the market’s storms. Goldman has yet to lose a dime during the yearlong financial crisis despite having recorded $5 billion in asset write-downs, according to Bloomberg data. Those losses, however, are a fraction of those taken by Merrill Lynch, Morgan Stanley, or Citigroup Inc.
But Goldman’s days of coining profits may be coming to a halt temporarily because the firm is more exposed than its peers to sinking stock markets around the world, analysts say.
Posted by lumi at November 11, 2008 5:25 AM