(Recasts, adds details, share movement)
Sept 24 (Reuters) - Analysts are encouraged by the capital raising efforts of Goldman Sachs Holdings Inc (GS.N), but the dilutive impact of the capital raise pushed them to cut their 2008 profit view on the company.
On Tuesday, Goldman Sachs said it expects to raise $7.5 billion in capital, which includes $5 billion of preferred stock being sold to Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) (BRKb.N) and a common stock offering worth $2.5 billion.
Tuesday’s announcement comes after Goldman and rival Morgan Stanley (MS.N) said on Sunday that they would become bank holding companies, enabling them to accept deposits and killing the investment bank model that dominated Wall Street for decades.
Sanford C Bernstein said the combination of change to a bank holding company, addition of $7.5 billion in capital and Buffett’s endorsement should quickly end credit market debate about capitalization and liquidity position of Goldman.
Bernstein rates the stock “market perform.”
Kenneth Worthington of J.P. Morgan Securities considers the deal expensive for Goldman, but said the company’s higher capital ratios should give investors confidence and lead to a greater ability to tap the public debt markets when needed in 2009.
Worthington has an “overweight” rating on the stock.
The new 2008 profit estimates on the company now ranges between $11.70 and $12.10 a share, compared with the previous range of $11.93 to $12.50 a share.
Shares of Goldman were trading up nearly 3 percent at $128.70 in morning trade on Wednesday.
Reporting by Sweta Singh in Bangalore; Editing by Anil D'Silva