Jefferies Faces $43M Loss but Market Cap Plummets $4B; Goldman Sachs Banker Fired Over Trump Comments
In a week marked by financial turbulence and corporate fallout, Jefferies Group finds itself grappling with a market cap decline of nearly $4 billion, despite forecasting a relatively modest loss of $43 million linked to the collapse of First Brands, a troubled car-parts supplier. Meanwhile, Goldman Sachs has terminated a longtime Spanish banker following controversial public remarks about former President Donald Trump.
Jefferies’ Share Price Plunges Amid First Brands Collapse
Richard Handler and Brian Freeman, Jefferies’ CEO and Vice Chairman respectively, issued a rare and sober letter addressing growing investor concern over the fallout from First Brands, an Ohio-based auto parts conglomerate that filed for bankruptcy on September 29.
Jefferies’ stock has tumbled sharply — down 18% last week and a further 8% in after-hours trading on Friday — sending the bank’s market capitalization from $15 billion in mid-September to just under $11 billion.
Handler and Freeman argue that this decline is “meaningfully” overdone, attributing it to market overreaction rather than fundamentals. They assert that the true financial exposure is limited to around $43 million, despite widespread speculation about broader losses tied to First Brands.
Complex Ties to First Brands
The bank’s entanglement with First Brands primarily arises through its merger with Leucadia Asset Management in 2022. Leucadia manages Point Bonita Capital, a fund that invested $715 million in First Brands.
Concerns have mounted over whether First Brands engaged in fraudulent behavior, notably whether loan collateral invoices were recycled across multiple lenders — a scenario likened by the Financial Times to taking out multiple mortgages on the same property without lenders’ knowledge.
Jefferies insists it was unaware of any such fraud, noting that it withdrew from a planned $6 billion refinancing of First Brands in July after requesting a “quality of earnings” report which was never delivered. Handler and Freeman emphasize that nine other banks were also involved with First Brands, underscoring the shared risks across the financial sector.
Reputational Risks and Future Prospects
While the financial impact may be contained, the reputational fallout is a lingering concern. Jefferies had served as First Brands’ banker for over a decade, supporting its aggressive acquisitions strategy of smaller suppliers.
Handler and Freeman remain optimistic, highlighting Jefferies’ strong balance sheet — with $11.5 billion in cash and $10.5 billion in equity — and a projected $1 billion in net earnings. They predict the share price will “correct soon,” citing “significant momentum” and “positive prospects” ahead.
Goldman Sachs Banker Ousted Over Trump Commentary
Separately, Goldman Sachs has dismissed Alvaro del Castaño Villanueva, a managing director in Spain, following his public article criticizing former President Trump. Del Castaño described Trump as displaying “poor manners,” “self-centeredness,” and a “morally questionable nature,” comments the bank said did not reflect its views.
Goldman Sachs stated it was unaware of his writings prior to termination. Del Castaño, who had served Goldman Sachs for 30 years, is now free to express his opinions outside the firm.
Broader Financial Sector Ripples
The First Brands debacle has unsettled several investors and institutions:
- Creditor Raistone alleges $2.3 billion has disappeared from First Brands’ accounts.
- Morgan Stanley Asset Management and BlackRock are seeking to redeem investments in Point Bonita.
- BDO, a firm linked to First Brands, has initiated layoffs and restricted non-essential travel amid financial pressures.
Additionally, industry insiders note a wider shakeup in asset management and banking. For example, Andrew Berger, a once-successful mortgage portfolio manager at LMR, recently lost his job after suffering losses.
Market and Industry Insights
- JPMorgan reversed its policy, now requiring biometric data for entry to its new headquarters.
- AI systems capable of passing CFA exams have sparked debate about professional certification.
- Citi projects $20 billion in Indian IPO fundraising over the next year.
- Oracle stock fell 7% following slower-than-expected cloud revenue growth.
Final Thoughts
Despite the immediate turmoil, Jefferies’ leadership remains confident about weathering the storm. The coming weeks will reveal whether markets share that optimism or if the First Brands saga will leave longer-lasting scars on investor confidence.
