As financial stocks recover, Goldman Sachs may take advantage
There have been rumors for several weeks that Goldman Sachs (GS) would raise money to pay back its TARP obligations. It now appears that the action is more likely, probably fueled by the jump up in financial shares.
Goldman traded below $73 in early March, but now changes hands above $124, up 70 percent in a month. Its market cap is nearly back to $60 billion.
According toThe Wall Street Journal, Goldman "is considering making a multibillion-dollar offering of its shares to investors as part of an effort to repay a $10 billion government loan."
Investors can expect similar moves from several of the large and healthy banks that would like to rid themselves of TARP obligations. Shares in JP Morgan (JPM) are up over 60 percent in the last month. With a market cap now over $125 billion, it could raise $10 billion without substantial dilution to shareholders. After its strong earnings pre-announcement, Wells Fargo (WFC) could do the same.
No one should be surprised if big banks use the recent market run-up to raise some capital for some extra dry powder. The industry is not out of the woods yet.
Douglas A. McIntyre is an editor at 24/7 Wall St.