Are Goldman investors complaining?
Goldman Sachs has a shocking lack of respect for investors. But is anyone bothered by that?
That's been a hot topic of discussion this week as investors digest the news that the firm was hit by civil-fraud charges Friday. Goldman's stock fell by nearly 13% after news of the SEC complaint hit.
I think that most corporate news is generally already baked into a stock's price -- even before it's announced. But in this case, I'd say Goldman investors were unprepared for the bomb that dropped.
So should Goldman have told everyone? The company knew an SEC investigation was underway.
Goldman defended its actions in a conference call, saying that it didn't need to tell investors about the investigation. Post continues after video:
“We did not think it was material,’’ said Goldman lawyer Greg Palm, according to The Wall Street Journal. “It’s one CDO, and we thought we had a good case."
Over and over, we've seen companies reach into that "material" defense. The notion of what is material to the business and what isn't is so fuzzy and vague that companies can get away with using it on any occasion. And they do.
But Goldman's market value dropped by $12 billion on Friday, which kinda shows that investors thought it was material. So, looking back, does Goldman now think it should have told everyone?
“We incorporate anything that happens into our thinking” about how to do things in the future, Palm said, according to the Journal.
Translation? Goldman has very little respect for its own investors. But are investors complaining? The company just said that its first-quarter profit jumped 91% from a year ago. That's gotta take some of the sting off of Friday's share price drop.
For a great takedown of Goldman's defense, check out this post by Bond Girl. "Regardless of the legal merits of the case, it is clear that Goldman has little regard for its clients or ethical behavior in general," she writes.
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