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Goldman Sachs falls after Morgan Stanley downgrade over Malaysian fund probe

The investment bank was lowered to 'equal-weight' because of the risks related to the investigation of its role in raising funds for the state fund 1MDB

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While Goldman’s stock appears cheap, Morgan Stanley says it doesn't “see a catalyst for significant multiple expansion" until the 1MDB issue is resolved

Goldman Sachs Group Inc. (NYSE:GS) dropped after Morgan Stanley (NYSE:MS) downgraded the investment bank to “equal-weight”  over the risks surrounding the investigation of Goldman’s role in raising funds for the Malaysian state fund 1MDB.

Citing published media reports, Morgan Stanley said in a research note Wednesday that the US Justice Department has announced criminal charges against two former Goldman bankers: Tim Leissner and Roger Ng.

READ: Goldman Sachs, Morgan Stanley ride deals to score big 3Q earnings beats

Shares of Goldman dropped $2.90 to $189.70 on Friday.

While Goldman is cooperating with the investigation, it is unclear how long the issue will take to resolve, what the fines and penalties could be and what costs Goldman will face in order to satisfy regulators, according to Morgan Stanley.

Morgan Stanley said Goldman’s stock appears cheap at 7.1 times projected 2019 earnings per share but added that it doesn’t “see a catalyst for significant multiple expansion until the issue is resolved.”

A Goldman spokesman declined to comment.

— This story was updated to give Goldman's stock price.



Contact Dennis Fitzgerald at [email protected]

Quick facts: Goldman Sachs

Price: 220.25 USD

NYSE:GS
Market: NYSE
Market Cap: $77.99 billion
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