It begs the question "just WTF do you own when u buy a share of a company's stock ?"
Goldman mulls big equity offering:
Investment bank may use the money to repay government investment
By Alistair Barr, MarketWatch
Last update: 11:35 a.m. EDT April 10, 2009Comments: 24SAN FRANCISCO (MarketWatch) -- Goldman Sachs Group is considering a multibillion-dollar equity offering as the investment bank tries to repay a $10 billion investment it got from the U.S. government in the midst of the financial crisis last year, The Wall Street Journal reported Friday.
The share sale, which could be announced as early as next week, comes as the firm prepares to report "solid" first-quarter earnings Tuesday. Goldman executives haven't determined the exact size of the offering, but it is expected to be at least several billion dollars, the newspaper reported, citing unidentified people familiar with the matter.
Goldman spokesman Ed Canaday declined to comment.
If a Goldman offering succeeds, that may suggest private investors are becoming more willing to invest equity capital in the U.S. banking sector. That appetite has been sorely lacking in the past year, as the financial crisis pushed several firms into bankruptcy or into the arms of the government.
The Treasury Department invested more than $100 billion in the nation's largest banks in October in the wake of the collapse of Lehman Brothers and the bail out of American International Group (AIG:American International Group Inc
. Goldman got $10 billion of the money, which came in the form of preferred shares.
Since the infusions, the government has imposed compensation limits on firms that got support and some banks in the program have complained that the rules have changed.
The stock market has also rallied strongly since early March and Goldman shares have surged 47% so far this year. That makes it easier for the firm to sell new shares to raise capital from private investors.
Goldman Chief Executive Lloyd Blankfein said in late March that the firm may be in a position to repay the government after the Treasury completes a so-called stress test of the nation's largest banks by the end of April.
Repaying the government is favored by Goldman's employees, eager for the paydays of the past; by investors, who applauded the firm's finance chief when he made the suggestion; and its executives, who believe the government's role will make it harder for the firm to compete, The Wall Street Journal said Friday.
"A return of taxpayer funds would manifest the bank's restored strength and set it apart from the pack -- just as in better times," Isabel Schauerte, an analyst at financial research and consulting firm Celent, wrote in an email sent to MarketWatch.
"A failure in the capital-raising endeavour, however, could trigger a potentially momentous decline in investor and creditor confidence," she warned.
Analysts polled by Thomson Reuters expect Goldman Sachs to report earnings for the first quarter of $1.51 a share when they roll out results on Tuesday. See full story.
Alistair Barr is a reporter for MarketWatch in San Francisco.
