Goldman Sachs Group Inc., Wall Street’s most profitable securities firm, climbed more than 4 percent amid speculation it will settle U.S. claims that it defrauded investors. CNBC reported after the market closed that the firm reached a settlement.
Goldman Sachs jumped in New York trading after the Securities and Exchange Commission said it would make a “significant announcement” at a 4:45 p.m. news conference.
The New York Times reported that the firm will pay $550 million to settle the claims, without admitting wrongdoing. Of that, Goldman Sachs will pay $300 million in fines and the rest will be restitution.
“If and when a settlement is reached, the pool of potential investors in Goldman stock will get expanded,” Michael Mayo, an analyst at CLSA Asia-Pacific Markets in New York, wrote in a note to investors today. “Many that we have spoken with are prohibited from owning Goldman stock when there is a threat of criminal action.”
Goldman Sachs created and sold collateralized debt obligations linked to subprime mortgages in 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped picked the underlying securities and bet against the vehicles, the SEC said in an April 16 lawsuit. Billionaire John Paulson’s firm earned $1 billion on the trade and wasn’t accused of wrongdoing.
Goldman Sachs has said the allegations were unfounded.
The firm’s stock, which closed today at $145.22, has dropped 21 percent since April 15, the close before the suit was filed. The S&P 500 Financial Index declined 13 percent in the same period.
Mayo, who predicted last month that a settlement could be reached as early as July 20, has a “buy” rating on Goldman Sachs shares with a target stock price of $207.