Wall Street’s former love-child reported only very modest numbers for Q2. While the company completely lost credibility with America’s Main Street, it seems that this fact now also sneaks into consideration in the corporate world. Bad reputation, earned, and still earning more of it, during the still ongoing financial crisis will fuel lower expectations on the earnings side for quite some time. With that, the stock might further fall and “stay low” for some time.
Goldman Sachs has never attacked its PR problem. Actually, in a way, with a completely inappropriate display of arrogance, the problem became an every day appearance for the firm. Not that business and business activity is weak, even though the economy is still struggling due to high unemployment rates and political blunder in D.C., there is quite some activity in deal making and the social media frenzy and the so called Internet 2.0 bubble offer lots of opportunity. Looking at Goldman’s numbers, it actually saved the day. However, given all that activity, Goldman’s numbers are a disappointment.
One of the reasons why they fell short could be “the major PR issue that got an own office in Goldman’s headquarter”. If you are going public you need positive publicity. Goldman cannot deliver that. If Goldman supports and underwrites an IPO, Main Street assumes automatically that something stinks. With Goldman deliberately neglecting a positive image, it will hurt the company itself and much worse, its clients.
Facebook might display a great example until their IPO finally happens. Already with problems of their own and the new Google+ as a serious contender, it is not of help to have an underwriter with a miserable image, especially when you cater to Main Street. Goldman lost deals and will continue to lose deals, just because out of arrogance towards its PR problem.
As an investor, I would not touch the stock until a campaign backed by action becomes visible. I am afraid that further neglect and ignorance towards the problem, will further lead the stock downwards. Sleeping at the wheel can cost the company and its investors dearly.