Goldman Sachs (GS) Stock Falls, Tesla Relationship Criticized
NEW YORK (TheStreet) -- Shares of Goldman Sachs (GS) - Get Report are down 3.32% to $154.63 in late-afternoon trading Thursday as the New York City-based bank is criticized for assisting Tesla (TSLA) in its secondary offering just hours after upgrading the stock to "buy."
When upgrading shares Wednesday morning, Goldman noted that Tesla would need to raise about $1 billion from capital markets to drive its expansion.
After Wednesday's market close, Tesla announced a $2 billion secondary offering to accelerate production of its upcoming Model 3 sedan. Tesla expects to produce 500,000 vehicles a year by 2018, and hopes to launch the Model 3 by late 2017.
Research and underwriting divisions of banks are supposed to be divided by what's known as the "Chinese Wall", and Goldman Sachs said it complied with the rule, MarketWatch reports.
Tom Gorman, a partner at law firm Dorsey & Whitney and former lawyer for the SEC, told MarketWatch that the timing is likely a coincidence, but admitted that its appearance is worrisome.
"The whole question of research overlapping with investment banking has long been a hot topic and one that is regularly looked at by the SEC," he said. "I would fully expect that Goldman has such policies in place."
Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C+.
Goldman Sachs' strengths such as its expanding profit margins over time. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
You can view the full analysis from the report here: GS
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.
