Will Goldman Sachs Raise Equity to Repay Government?
Reuters reports that,
Goldman Sachs Group Inc is considering making a multibillion dollar share offering to investors as part of its efforts to repay a $10 billion government loan, the Wall Street Journal reported citing people familiar with the matter.
The announcement could be made as early as next week and though Goldman executives haven't determined the exact size of the offering, it is expected to be at least several billion dollars, the people told the Journal.
Normally, companies raise equity to pay down debt when they believe their stock price is inflated. In this case, however, it is a bit harder to tell what Goldman management is truly thinking because paying down TARP funds may actually be seen as a sign of increased confidence by management that the bank can go it alone.
It will be interesting to see how investors react. Our guess: Goldman shares will come under pressure in the days ahead.
Disclosure: No position.