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J. C. Penney Company, Inc. Message Board

  • daolag daolag Sep 27, 2013 12:50 AM Flag

    MUST READ:Goldman Sachs: The Underwriter...ALL BUT A GAME

    Over the years, Goldman SachsGS -0.01% has often drawn criticism for having its fingers in multiple, conflicting pies.

    This week, Goldman Sachs’s relationship with J.C. PenneyJCP +2.96% is giving some in the markets fresh reason to pause.

    For starters, Goldman helped arrange a $2.25 billion term loan for J.C. Penney earlier this year.

    It’s advising investment clients. On Tuesday, the credit research group at Goldman Sachs initiated coverage of struggling J.C. Penney’s debt with an “underperform” rating.

    Central to their thesis was that the company would “look to build a bigger liquidity buffer.” Goldman’s analysts said they felt a debt raise was more likely than selling more stock. But they said the “key risk” would be a “significant” capital raise of up to $1 billion through the stock.

    Stock traders don’t usually pay a lot of attention to credit research, but it seemed that many thought Goldman knew what it was talking about and sent the stock down 15% Wednesday

    And then sure enough, Goldman stepped in on the underwriting side Thursday. J.C. Penney hired Goldman Sachs to manage a highly dilutive stock offering of 84 million shares. This deal could raise upwards of $1 billion, the same range highlighted in Tuesday’s note.

    The result: Thursday night, some traders are asking “what did Goldman know and when did it know it?”

    A Goldman spokesman said that the firm’s research group operates independently of its investment banking activities.

    In the past Goldman has acknowledged that its trading and investment banking businesses do present potential conflicts of interest and it says it manages them according to the rules.

 
JCP
9.06+0.29(+3.31%)Jul 24 4:00 PMEDT

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