U.S.-based investment bank The Goldman Sachs Group (NYSE:GS) has filed a lawsuit against the Malaysian Government in the London Court of International Arbitration. Both GS and Malaysia are in dispute over the settlement of the 1Malaysia Development Bhd (1MDB) investment fund scandal.
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Brief History
1MDB was a sovereign fund established in 2009 by Malaysian financier Jho Low to drive economic development. It raised billions of dollars in bonds for investment projects and joint ventures between 2009 and 2013.
Later in 2015, a probe by the U.S. Department of Justice (DoJ) discovered that about $4.5 billion was diverted to offshore bank accounts and shell companies, many of which were connected to Low. Also, Goldman was said to have arranged the bond deals and earned about $600 million in fees.
Disagreement Between the Parties
GS had agreed to settle the case by paying a penalty of $3.9 billion. Further, the company was required to make a one-time interim payment of $250 million if Malaysia did not receive at least $500 million in assets and proceeds by August 2022.
However, Goldman and Malaysia are in a dispute over whether the latter received the minimum amount or if the interim payment was due. Thus, to resolve the matter, Goldman filed for arbitration with the London Court of International Arbitration.
Is GS Stock a Good Buy?
The lawsuit comes ahead of the company’s third-quarter earnings release scheduled for October 17. JMP Securities analyst Devin Ryan expects Goldman Sachs to report dull Q3 results. The analyst lowered the price target to $440 from $450 while maintaining a Buy rating on the stock.
Overall, Goldman Sachs stock shows a Strong Buy Street consensus based on 14 Buy and four Hold recommendations. Meanwhile, the $393.50 average analyst price target implies an upside potential of 25.7% from the current level.
