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In Wake Of Settlement, Will Goldman Stock Surge?

On Thursday Goldman Sachs agreed to settle a securities fraud case brought by the Securities and Exchange Commission for $550 million.

Although that's the largest penalty ever assessed against a financial services firm, its sharply less than most analysts had expected. And perhaps more important to Goldman, the move resolves a major public relations nightmare.

Now that Goldman has settled with the SEC will shares trade sharply higher?

Instant Insights with the Fast Money traders

I crunched some numbers, says Joe Terranova. On April 16th Goldman was trading $180 and the S&P was around 1200. Now the S&P is at 1100. Just factoring in the decline in the market puts Goldman around $160. But we have finreg which skims 10% off of earnings. So my target is $155. That’s about where GS traded in the aftermarket on Thursday. I think the stock is about where it should be.

Goldman is now down about 17% since April 16th, adds Tim Seymour. Rivals such as JPMorgan and Morgan Stanley are also down about 17% since the same time and they're were not facing lawsuits. I too think GS stock is right where it should be.

I expect the stock to jump Friday, the settlement takes one of the major uncertainties out of the equation, counters Sanford Bernstein analyst Brad Hintz. I think it’s now a $200 stock. This is a good company that can generate ROE’s of 17% or 18% under Volcker.

Even under Volcker it’s going to be a powerful trader just not as powerful as it used to be.

Also, the settlement was a multi-billion dollar win for Goldman in terms of no future class action litigation, says Jon Najarian. Goldman didn't have to admit to wrong doing. I'd add a couple billion back in and I think the stock could go to $170.

If it plays out the way I think it’s going to play out, CEO Lloyd Blankfein will probably step down – but on his own terms, says Guy Adami. I expect Goldman is going to become a very different place.

I think it's fantastic for the industry, says Anthony Scaamucci. We've been saying all along if Goldman settled and we got clarity on finreg it would be a good thing for financials. I think Goldman stock goes much higher. And I agree with Guy that we see management changes at Goldman.

Who's next?

The Fast Money traders are concerned that now Goldman has settled their charges, the SEC will go after somebody else.

“I fear this is a newly empowered and much more confident SEC,” says Tim Seymour on Thursday’s Fast Money. The settlement appears to leave the door open for additional enforcement actions by the SEC and further investigation by federal prosecutors.

Sanford Bernstein analyst Brad Hintz tells the desk if the SEC does pursue other financials it will be those that deal with mortgages. “Their next big challenge will be the mortgage underwriters,” he says. “And we’re already seeing it with the Freddie and Fannie investigation that’s started.”

Here are some highlights of the settlement:

- The agreement resolves the April 16 lawsuit accusing Goldman of misstating and omitting key facts about its offerings of collateralized debt obligations linked to risky mortgage securities in early 2007.

- Of the $550 million to be paid by Goldman, $250 million would be returned to investors; $300 million would be paid to the U.S. Treasury.

- Settlement requires approval by U.S. District Judge Barbara Jones in Manhattan

- Settlement does not resolve SEC charges against Goldman vice president Fabrice Tourre, the lone individual defendant named in the original lawsuit. SEC says its litigation against Tourre continues.

- Settlement requires "remedial action" by Goldman in its review and approval of offerings of certain mortgage securities.

- Goldman said in the settlement that it is conducting a review of its business standards.

- Settlement said Goldman acknowledged that marketing materials for the CDO at issue in the case, known as ABACUS 2007-AC1, "contained incomplete information."

- Goldman said in the settlement that "it was a mistake" for its ABACUS marketing materials to state that portfolio was "selected by" ACA Management LLC without disclosing that hedge fund Paulson & Co Inc, which was betting against the underlying securities, helped choose the portfolio




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Trader disclosure: On July 15, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BP), (INTC), (MSFT); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (GOOG), (AMZN), (MON), (APC), (GMCR), (MYL), (MRVL), (BAC), (ADI), (ADBE), (AKAM), (HES), (CVS), (AXP), (EMC), (ABT); Jon Najarian own (APC) short calls; Jon Najarian own (COP) short calls; Jon Najarian own (CVX) short calls; Jon Najarian own (GS) put spreads ; Kelly owns (BP) puts; Kelly is short (GS)

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own (C)
Accounts managed by Kanundrum Capital own (GME)
Accounts managed by Kanundrum Capital own (BIG)
Accounts managed by Kanundrum Capital own (NWL)
Accounts managed by Kanundrum Capital own Japanese Yen
Accounts managed by Kanundrum Capital are short (USO
Accounts managed by Kanundrum Capital are short Aussie Dollar
Accounts managed by Kanundrum Capital are short (AMZN)
Accounts managed by Kanundrum Capital are short (KMX)
Accounts managed by Kanundrum Capital are short (FXI)
Accounts managed by Kanundrum Capital are short (EWO)
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Accounts managed by Kanundrum Capital are short (JOE)
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Accounts managed by Kanundrum Capital are short (SLX)
Accounts managed by Kanundrum Capital are short (CSX)
Accounts managed by Kanundrum Capital are short (FCX)

For Brad Hintz
The following companies are or during the past twelve (12) months were clients of Bernstein, which provided non-investment bankingsecurities related services and received compensation for such services GS / Goldman Sachs.
An affiliate of Bernstein received compensation for non-investment banking-securities related services from the following companies GS / Goldman Sachs
In the next three (3) months, Bernstein or an affiliate expects to receive or intends to seek compensation for investment banking services from GS / Goldman Sachs.
Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the following companies GS / Goldman Sachs.

For Gene Munster
Piper Jaffray Is A Market Maker In (GOOG), (YHOO), (BIDU), (AAPL)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (GS)

For Pavel Molchanov
**No Disclosures**

For Tom Curran
**No Disclosures**



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