Goldman Sachs Group Inc. may spend $621 million to settle the Securities and Exchange Commission's fraud suit that triggered a 13% one-day drop in the firm's stock, analyst Brad Hintz said.
Negotiations between the SEC and Wall Street's most profitable investment bank may end with Goldman Sachs paying a fine of about $250 million, plus $371 million to reimburse investors in the disputed trades, Mr. Hintz, an analyst at Sanford C. Bernstein & Co., wrote in a note to clients on Thursday.
“While this would be painful to Goldman, we believe it would allow both Goldman Sachs and the SEC to walk away declaring ‘victory',” said Mr. Hintz, who has had an “outperform” rating on the stock since June 2009. “Certainly Goldman wants this case settled. Its management has stated that it wants a 'normal' relationship with its regulators.”
The amount could reduce the New York-based firm's earnings per share by $1.05, or 5.4% of 2010 earnings, which are estimated to be $19.55, according to the average estimate of analysts in a Bloomberg survey.
Goldman Sachs shares slumped on April 16 when the SEC accused the firm of defrauding investors in a collateralized debt obligation linked to home loans. The firm concealed the fact that Paulson & Co., a New York-based hedge fund, picked components of the CDO and bet it would collapse, the agency said. The bank, led by Chief Executive Officer Lloyd Blankfein has denied wrongdoing.
SEC spokesman John Nester and Goldman Sachs spokesman Michael Duvally declined to comment.