Goldman Sachs bankers with deferred stock bonuses (of whom there may, admittedly, be comparatively few), are having a good September. Last Friday, Goldman's share price peaked at $183.7. This was its highest level for five years and an increase of 20% since this year's low at the start of April.
Clearly, employees selling Goldman stock have reason to be pleased.
Except that our research suggests that Goldman bankers would a whole lot more pleased if the bank's stock increased just a bit more. Another 7% increase to $195 would be great. Another 14% increase and they'd be getting ready to throw Ferragamo loafers about in a ecstatic frenzy. Another 25% increase and, well...
Why? Because if Goldman's stock price finally hits a range of $195-$209.99, then nearly 6m of employee stock options worth $1.3bn and issued years ago -before the financial crisis, will AT LAST be in the money. The wait will be over. Witness the chart below, taken from Goldman's 2013 annual report:
Source: Goldman Sachs
Unfortunately, however, Goldman people may yet be disappointed. For all those in the money options to be really worth anything, the share price will need to rise above $210. And this could be wishful thinking.
Goldman is due to report its third quarter results on October 16th. While M&A and ECM are expected to do well, JPMorgan's analysts are predicted that fixed income currencies and commodities revenues will be down 16% quarter-on-quarter (albeit up 10% year-on-year), which may arrest any further big increases in the stock price. Analysts at JPMorgan have a price target for the firm of just $150.
Worse, Goldman is expected to keep a strict lid on costs. Even if the share price does rise further and those ancient options become worth something, cash compensation is likely to fall. For contemporary employees, the two things may yet cancel each other out.
Instead, the net beneficiaries of a really big further increase in Goldman's share price are likely to be all those ex-Goldman bankers who've quit the firm but retained the right to cash-in their old stock options if they ever break water. They'll be hoping that this happens soon - those options were issued in 2007 and earlier. It's been a long, long wait. It's not over yet.