Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Goldman shares tumble on "sell" rating

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- Goldman Sachs stock tumbled Friday after a pair of analysts cut their rating on the firm amid reports of a federal criminal investigation into the Wall Street investment bank.

Goldman (GS, Fortune 500) shares finished over 9% lower on the New York Stock Exchange.

goldman.png
Goldman shares have struggled since the SEC filed charges against the firm earlier this month. Its stock extended its recent decline in Friday trading.

Citing the company's growing legal woes, Matthew Albrecht, a stock analyst for S&P, lowered his rating on the stock to a "sell" from a "hold".

"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," he wrote in a note to clients.

News of a federal probe also prompted Bank of America-Merrill Lynch analyst Guy Moskowski to downgrade the firm Friday, lowering his rating to a "neutral" from a "buy."

"We continue to believe that GS has long-term earnings power beyond what is discounted in the share price," he wrote. "However, it is very difficult to see the shares making further progress until the matter has been resolved."

The ratings cut comes after reports surfaced late Thursday that the company and some of its employees were facing a federal criminal investigation into the dealings of its mortgage-trading operations.

A Goldman spokesperson would not confirm those reports, but said the company was not surprised given the scrutiny surrounding the firm recently. He added that the company would cooperate with any requests for information from authorities.

Another probe would be a major setback for Wall Street's top firm, which has already been reeling from recent civil charges brought against the company by the Securities and Exchange Commission.

Earlier this month, the agency alleged that Goldman defrauded investors in the sale of securities tied to subprime mortgages.

Goldman has been under intense scrutiny ever since. Earlier this week, a group of seven current and former executives at the firm endured a grueling 10-hour hearing from Senate lawmakers over their role in the financial crisis, including bundling and selling toxic mortgage securities.

The company has vehemently denied the SEC's charges though, claiming that investors in the deal were never deceived in any way. To top of page

Index Last Change % Change
Dow 16,528.03 -114.98 -0.69%
Nasdaq 4,776.51 -51.82 -1.07%
S&P 500 1,972.18 -16.69 -0.84%
Treasuries 2.20 0.01 0.64%
Data as of 5:54pm ET
Company Price Change % Change
Bank of America Corp... 16.34 -0.02 -0.12%
Freeport-McMoRan Inc... 10.64 0.14 1.33%
Apple Inc 112.76 -0.53 -0.47%
Intel Corp 28.54 0.12 0.42%
Ford Motor Co 13.87 0.13 0.95%
Data as of 4:02pm ET
Sponsors

Sections

Walmart, facing higher labor costs due to raise in starting wage, is cutting workers' hours at some stores. More

A conservative think tank is sponsoring a Times Square billboard as a tribune to its opposition to a new minimum wage rule for fast food workers in New York state. More

Blue Apron, Boxed, and Nature Box are worth an estimated $2.5 billion. Their co-founders all went to the same high school. More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Looking for something good on Netflix? These entertaining films will help you learn more about finance and investing. More