Tags: goldman | sachs | stock | loss

Goldman Lost $6 Billion Trading Own Stock

By    |   Thursday, 03 Sep 2009 09:49 AM

Wall Street wonder Goldman Sachs managed to buy its own stock high and sell it low, losing $6 billion in the process, Business Week reports.

From 2006 through early 2008, excessive self-confidence led Goldman to spend about $18 billion buying 100 million shares of its own stock, paying an average per share price of $184.

After the financial panic hit last September, Goldman had to replace the money, so it sold 94 million shares at $123 a share.

Even without counting the preferred stock and warrants it sold to the government and Warren Buffett at similarly low prices, Goldman lost more than $6 billion.

Though Goldman shares are up from $59 in January to around $163, they haven’t kept pace with the S&P 500 since the firm’s July 14 earnings call.

For the stock to go higher, some analysts say, the market will need confidence that the firm will add back leverage to increase profits.

Goldman’s use of leverage has been critical in meeting its stated goal of making profits of at least 20 percent of equity over the business cycle.

If the market environment makes meeting that goal impossible, the investment bank’s shares may well fall again.

Goldman currently forecasts 2 percent growth in U.S. gross domestic product in 2010.

“We think the recession is ending right now,” Goldman senior investment strategist Abby Joseph Cohen told Bloomberg during a recent interview.

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Wall Street wonder Goldman Sachs managed to buy its own stock high and sell it low, losing $6 billion in the process, Business Week reports.From 2006 through early 2008, excessive self-confidence led Goldman to spend about $18 billion buying 100 million shares of its own...
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Thursday, 03 Sep 2009 09:49 AM
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