Goldman Sachs SEC Drama Deepens As Regulator Fines Bank For $6 Million Over Incomplete Trading Info

Key takeaways

• Goldman Sachs has been fined $6 million for inaccurate and incomplete trading info by the SEC
• The bank is closing in on finding a buyer for its nightmare GreenSky acquisition, which is expected to sell for only $500 million
• Goldman Sachs shares have slid over 4% in a week

Banking giant Goldman Sachs has landed itself in hot water with the SEC after failing to provide complete and accurate information to the regulator for ten years. The result? Goldman has been slapped with a $6 million fine as punishment.

The embattled bank has been hitting the headlines recently with both good and bad news – though this latest twist doesn’t exactly do Goldman Sachs any favors with its clients or investors. As for the stock price, it’s headed on a downward trajectory.

Is this a make-or-break moment for Goldman? Here’s the lowdown on what the SEC beef is and what the share price reaction was.

What’s the latest with Goldman Sachs?

Goldman Sachs has agreed to pay $6 million in fines after the U.S. Securities and Exchange Commission (SEC) found it had provided insufficient trading data for the last decade.

The banking titan was found responsible for submitting 22,000 inadequate ‘blue sheet’ submissions between 2012 and 2022, impacting over 163 million transactions. It’s standard practice for the SEC to request this info to see who’s buying and selling trades.

Goldman Sachs submitted 29 of the 43 errors to the SEC when it discovered the issue, but after an investigation, the SEC also found that the bank didn’t have sufficient internal processes to verify how accurate its blue sheet submissions were.

“Blue sheet data is vital to the Commission’s ability to carry out its enforcement and regulatory functions and to protect investors and maintain market integrity,” the SEC said in a statement.

Goldman fully admitted to the findings and is “pleased to have resolved this matter,” a spokesperson from Goldman Sachs said. The bank is in the process of remediating its final categories of EBS deficiencies and resubmitting corrected EBS to the Commission.”

What was the market reaction?

Goldman Sachs’ share price ended Friday trading 0.9% lower due to the news. Goldman’s stock had actually been on a winning streak earlier in the month, gaining 6% between September 11 – 14. But since then, the share price has steadily declined by 4.8% in value and counting.

Goldman Sachs’ share price is down 5.29% so far in 2023. It’s fared better than Citigroup, which has seen a 10.62% drop in its stock, but Morgan Stanley has narrower losses at 2.83%, and JPMorgan has bucked the trend by rising 7.85% in the same period.

Is Goldman Sachs selling GreenSky?

Goldman Sachs recently admitted defeat on its disastrous acquisition of fintech lender GreenSky, which it bought for $2.24 billion in an all-stock transaction in 2021 and put the company up for sale.

It’s facing the prospect of getting a mere $500 million for the company, which is less than a quarter of what it paid. The deal’s value had already fallen to $1.7 billion when it closed in March 2022 as Goldman Sachs’ share price plunged.

Advanced talks are said to be held with a consortium of investors, including Sixth Street, Pacific Management Investment and KKR. Apollo Global Management had been in the running but was trumped by the consortium.

The sale ends Goldman Sach’s ill-executed foray into consumer banking, which has seen the bank introduce online deposit accounts and personal loans. The pivot has cost Goldman Sachs $3 billion in losses over the years, having already made moves to divest most of its unsecured consumer loans since last year.

Goldman Sachs’ latest earnings beat

The banking giant’s second-quarter earnings report revealed Goldman Sachs is going through a tricky financial period. Its earnings arrived at $3.08 a share compared to the $3.18 expected. Though revenue beat estimates at $10.9 billion, it had fallen 8% compared to last year.

The beat confirmed a $504 million write-down on GreenSky, another blow confirming the acquisition’s failure. More charges are anticipated to be on the way once the deal has closed. Goldman also faced $485 million in real estate write-downs.

A slump in investment banking and trading has left Goldman Sachs struggling to stay afloat. As a result, the bank recently announced it was planning another round of job cuts to across the company, which could amount to as much as a 5% reduction in global headcount.

The job cuts will target those deemed underperformers and are anticipated to occur in October. Goldman Sachs had already laid off 500 employees last September and then conducted a mass layoffs round at the start of 2023, where 3,200 employees lost their jobs. It’s all in the name of achieving $1 billion in cost savings that Goldman Sachs is targeting.

Goldman Sachs’ recent stroke of luck

A bright spot for Goldman Sachs in the last few weeks has been a spate of market debuts, led by the barn-storming Arm IPO that set the market alight. After much anticipation ahead of its debut, the Arm IPO surged by 25% to hit $63.59, giving the British chip designer a valuation of $65 billion.

Goldman Sachs has been the lead underwriter on the Arm IPO, the Instacart debut, the marketing company Klaviyo IPO and the Birkenstock IPO, which is set to happen imminently. Instacart

Rising inflation and interest rates to tame it have created a deals desert. Renaissance Capital research found only 71 companies went public in 2022, down from 397 in 2021. As a result, Goldman Sachs’ equity underwriting revenue plunged 83% in that period. But now Arm was a blockbuster success, banks are hoping other tech companies will be tempted to list.

At a conference last week, CEO David Solomon was alive to how vital the Arm IPO was in potentially kicking off more debuts. “It has been quite a while since I could say to you we have a handful of very significant IPOs in the market. That’s an improvement,” Solomon said, elaborating that solid IPOs “[create] a virtuous cycle of bringing more of the pent-up backlog to market.”

But there’s investor uneasiness on the horizon. Arm’s share price has fallen daily since its IPO and is hovering around its initial IPO share price of $51, while Instacart has dropped to $30 – a 25% decrease from its debut. If these newly listed companies can’t hold their gains, it might put other companies off from listing.

The bottom line

Goldman Sachs has owned up to its mistake and accepted the SEC fine without any issues, though the $6 million fine is likely small change for the bank. What’s a bigger concern right now for Goldman is selling off its failed GreenSky acquisition and licking its wounds as the bank refocuses on its core business, cutting costs and weathering the storm.

Every bank hopes to see an uptick in IPOs, but perhaps Goldman more than others. The Arm, Instacart and Klaviyo market debuts have given the industry hope the drought is ending, but it’s still early days.