Oppenheimer’s star banking analyst Meredith Whitney is already keying in on Goldman Sachs Group’s (NYSE: GS) plans to raise cashs and shore-up its liquidity. She has noted that the $5 billion public stock offering seems "exorbitantly expensive" at $123.00 per share. When you add up the preferred financing and the warrants, Whitney estimates a total dilution in the vicinity of 16% to previous shareholders.
She also notes how it proves how challenging the current financialmarket conditions are even for the best of the best firms. Goldman can now buy inexpensive depositswith a stable earnings base now that it is a bank holding company, Whitney said. The company will now have lower leverageand therefore lower earnings than before.
Just yesterday she lowered estimates on the money center banks because of morewrite-downs and higher reserves with or without a government bailoutpackage.
Whitney is also lowering Oppenheimer’s expectations for Goldman. The FY2008 EPSestimate goes to $11.58 from $12.23, lower than the $13.00 consensus;the FY2009 EPS estimate goes to $9.21 from $12.05, well under the$15.74 consensus. There is no change to Whitney’s PERFORM rating andshe anticipates the pro forma gross leverage ratio (accounting for preferred stock andstock offering) is ~19.6x (vs. 23.7x in 3Q08 and 24.3x in 2Q08).
Jon C. Ogg
September 24, 2008
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