Goldman Sachs Finance Issues Leveraged Basket-Linked Notes Tied to Equities and Emerging Markets

Structure and Basket Composition of the Leveraged Notes

GS Finance Corp. issued leveraged basket-linked notes as part of its Medium-Term Notes, Series F program, fully guaranteed by The Goldman Sachs Group, Inc. The notes are structured to track the performance of an unequally weighted basket of three distinct equity indices. The composition reflects a significant tilt toward U.S. equity exposure through the S&P 500 Futures Excess Return Index, which carries a 65% weighting, while international developed and emerging market exposure comprises the remaining 35% of the basket through the MSCI EAFE Index at 25% weighting and the MSCI Emerging Markets Index at 10% weighting. This structure concentrates the notes' return profile heavily on domestic U.S. equity performance, with secondary exposure to international and emerging market movements.

The notes employ the S&P 500 Futures Excess Return Index rather than the widely recognized S&P 500 Index itself, which represents a material distinction for investors. The futures-based index tracks the performance of E-mini S&P 500 futures contracts, and the pricing supplement explicitly notes that the return on a futures contract investment is correlated with, but distinct from, the return on direct ownership of the underlying securities. This structural choice introduces basis risk and potential performance divergence between the notes and a direct S&P 500 equity investment. The initial basket level is set at 100, with the final basket level calculated on the determination date through a formula that multiplies each index's price return by its initial weighted value and sums the results across all three components.

Return Mechanics and Participation Framework

The notes incorporate a conditional participation structure that varies based on the final basket performance. For positive basket returns—when the final basket level exceeds the initial level of 100—investors receive their $1,000 face amount plus a participation payment equal to 1.95 times the basket return. This 1.95x participation rate represents significant leveraged upside exposure and allows investors to capture gains exceeding the underlying basket performance. For example, a 10% positive basket return would translate to a 19.5% gain on the notes, exclusive of the principal recovery. This leveraged structure amplifies potential gains but simultaneously concentrates risk in the inverse direction.

Capital preservation applies only within a limited range. If the basket declines by up to 20% from the initial level, investors receive their full $1,000 face amount with no additional gain or loss, effectively providing a cushion against moderate market deterioration. However, if the basket declines by more than 20%, investors experience full participation in losses. A 30% basket decline, for instance, would result in a 30% loss on the note, reducing the $1,000 face amount to $700. The disclosure explicitly states that investors could lose their entire investment in the notes, reflecting the open-ended downside exposure when basket performance falls substantially below the initial level. This asymmetric payoff structure—with capped upside at the $1,000 face amount floor but unlimited downside—creates significant tail risk for investors.

Estimated Pricing and Market Value Considerations

The preliminary pricing supplement discloses that the estimated value of the notes at the time terms are set on the trade date is expected to fall between $885 and $925 per $1,000 face amount. This valuation, determined by reference to Goldman Sachs & Co. LLC's pricing models and accounting for credit spreads applicable to GS Finance Corp., represents approximately 88.5% to 92.5% of par value. The gap between par issuance and the estimated theoretical value reflects the cost embedded in the note structure, including the optionality granted to investors through the leveraged participation feature and the embedded downside protection mechanism. The company did not disclose the precise midpoint of this estimated value range in the filing.

Market-making pricing and the evolution of secondary market value will follow a specific framework outlined in the preliminary pricing supplement. At the time of initial pricing, Goldman Sachs & Co. LLC would initially buy or sell the notes at approximately the estimated value plus an additional amount (the specific dollar amount per $1,000 face amount was not disclosed in this preliminary version). This additional amount will decline to zero on a straight-line basis from pricing through a date not yet specified in the preliminary supplement. After that date, the secondary market bid-ask pricing will reflect approximately the then-current estimated value of the notes using Goldman Sachs' pricing models, without the additional markup. The company did not disclose the duration over which this additional amount would decline.

Key Risks and Loss Potential for Investors

The preliminary pricing supplement emphasizes substantial risk factors that investors must carefully consider. The most critical risk is the potential for total capital loss, which the disclosure highlights prominently. If the unequally weighted basket of three indices declines by more than 20% from its initial level, investors lose dollar-for-dollar with the basket return, meaning a 50% decline in the basket would produce a 50% loss to the investor. Given the heavy weighting toward U.S. equities through the S&P 500 Futures component, the notes' performance will be predominantly driven by U.S. equity market conditions. Sharp declines in the S&P 500 futures market would cascade through the basket calculation and directly impair note value.

A secondary risk arises from the unequal weighting structure and potential index divergence. Because the S&P 500 Futures Excess Return Index carries 65% weighting while MSCI EAFE carries 25% and Emerging Markets carries only 10%, positive or negative performance in the heavily weighted U.S. component will overshadow offsetting movements in international indices. The disclosure notes that declines in one basket index may offset increases in other basket indices, but the weighting imbalance limits this diversification benefit. Additionally, the notes include full credit risk of both GS Finance Corp. and The Goldman Sachs Group, Inc., the guarantor. While the guarantee provides credit support, it does not eliminate the underlying issuer credit risk or protect against market performance deterioration.

Trade Date, Maturity Timeline, and Index Measurement

The notes are structured with a five-year lifecycle based on expected dates disclosed in the preliminary supplement. The trade date is expected to be July 24, 2026, and the original issue date is expected to be July 29, 2026. The determination date—on which the final basket level will be measured and the maturity payment calculated—is expected to be July 24, 2031. The stated maturity date is also expected to be July 29, 2031, providing a five-year holding period from trade date to determination. Investors should note that these are expected dates subject to potential revision, and the preliminary nature of the pricing supplement indicates that final dates may differ from those currently projected.

The basket return calculation spans from the trade date through and including the determination date, with initial index levels established as intra-day or closing levels on the trade date as determined by the calculation agent. This timing specification is critical because it fixes the starting point for measuring index performance and influences the initial weighted values used in the basket calculation. The preliminary supplement indicates that all necessary index-related documentation, including the June 2026 S&P 500 Futures Excess Return Index supplement and the Underlier supplement, was incorporated by reference into the prospectus. Investors should review these supplemental documents alongside the preliminary pricing supplement and the underlying General Terms supplement to fully understand the index measurement methodology and calculation procedures.

Guarantor Credit Support and Issuer Structure

The Goldman Sachs Group, Inc. provides a full and unconditional guarantee of the notes issued by GS Finance Corp., its subsidiary. This guarantee structure means that investors have recourse to The Goldman Sachs Group, Inc. in the event GS Finance Corp. defaults on its payment obligations. However, the guarantee does not protect investors from market losses resulting from adverse index performance. The notes are senior debt obligations of GS Finance Corp. under the senior debt indenture dated October 10, 2008, as supplemented by the First Supplemental Indenture dated February 20, 2015, with The Bank of New York Mellon serving as trustee. The company structure and indenture framework provide contractual protections typical of senior debt instruments but do not alter the fundamental market risk inherent in the basket-linked return feature.

The notes are issued in book-entry form under master note no. 3 dated March 22, 2021, and carry CUSIP 40054XT65 and ISIN US40054XT654. This book-entry structure eliminates physical certificate delivery and enables electronic settlement through the clearance system. Investors should be aware that while The Goldman Sachs Group, Inc.'s guarantee provides credit support, the company did not disclose any specific details regarding potential rating changes, capital ratios, or financial metrics of either GS Finance Corp. or the guarantor within this preliminary pricing supplement. The notes are explicitly not bank deposits, are not insured by the Federal Deposit Insurance Corporation, and are not obligations or guarantees of any bank—meaning they lack the protections available to traditional bank deposits.

Differences Between Futures-Based and Spot Index Performance

The preliminary pricing supplement contains an important technical distinction regarding the use of the S&P 500 Futures Excess Return Index rather than the standard S&P 500 Index. The futures-based index tracks E-mini S&P 500 futures contracts, and the disclosure explicitly states that the return on a futures contract investment is correlated with, but not the same as, the return on buying and holding the underlying securities directly. This difference reflects the mechanics of futures markets, which may introduce basis risk, roll costs when contracts expire, and potential performance divergence during periods of market stress or unusual liquidity conditions.

The Futures Excess Return Index structure may produce materially different returns than a comparable spot index investment, particularly during periods when futures markets trade at significant premiums or discounts to the underlying securities or when spot-futures basis widening occurs. Investors accustomed to traditional S&P 500 index performance may experience unexpected divergence if they assume the notes will track identical returns to a direct S&P 500 equity position. The company did not provide historical data or detailed analysis within the preliminary supplement comparing the performance of the S&P 500 Futures Excess Return Index to the standard S&P 500 Index, so investors should consult additional resources to understand potential performance differences and historical basis relationships between these indices.

Supplemental Documentation and Prospectus Integration

The preliminary pricing supplement incorporates multiple supporting documents by reference, including General Terms Supplement No. 17,745 dated January 20, 2026, the June 2026 S&P 500 Futures Excess Return Index supplement dated June 24, 2026, Underlier Supplement No. 49 dated June 24, 2026, the prospectus supplement dated February 14, 2025, and the base prospectus dated February 14, 2025. The preliminary supplement explicitly states that it supersedes any conflicting information in these documents and that some terms described in those documents may not apply to the offered notes. Investors must obtain and carefully review all relevant prospectus supplements and base prospectus materials to understand the complete terms, risks, and conditions governing the notes. The company did not provide the complete text of all referenced supplements within the preliminary pricing supplement itself, requiring investors to access them separately through the SEC EDGAR system or Goldman Sachs' disclosure channels.

The prospectus framework also includes detailed information regarding the calculation of basket return, the methodology for determining initial and final basket levels, and the specific definitions applicable to the notes' return calculation. The preliminary supplement notes that additional information regarding estimated value, pricing models, and risk disclosures appears on page PS-14 of the complete prospectus materials, which was not included in the preliminary version released for pricing purposes. Investors reviewing this announcement should treat it as preliminary disclosure subject to completion and material revision before final issuance and should confirm all final terms in the definitive pricing supplement that will accompany or follow the completion of pricing.

Secondary Market Liquidity and Market-Making Arrangements

Goldman Sachs & Co. LLC may, but is not obligated to, make a market in the notes after their initial sale. The preliminary supplement describes the pricing framework that would apply if Goldman Sachs elects to provide secondary market liquidity. The initial bid-ask pricing would reflect the estimated value plus an additional amount (not yet specified in the preliminary version) that would decline on a straight-line basis to zero over a period not yet disclosed. After the decline period concludes, secondary market pricing would track approximately the then-current estimated value determined using Goldman Sachs' pricing models, without the additional markup. The company did not disclose the width of customary bid-ask spreads that Goldman Sachs would apply when making a market, so investors should be prepared for potentially wide bid-ask spreads that could significantly impact execution prices on secondary market trades.

Investors should understand that the absence of a mandatory market-making obligation creates liquidity risk, particularly if market conditions deteriorate or if Goldman Sachs determines that market-making is economically unviable. In such scenarios, investors may face difficulty selling notes before maturity or may need to accept significant discounts to secondary market pricing models. The preliminary supplement indicates that GS Finance Corp. or any affiliate may use the prospectus in market-making transactions, suggesting that secondary market activity could be conducted through multiple channels, but the company did not provide information regarding expected trading volumes, typical bid-ask spreads, or the conditions under which market-making support would be withdrawn.

Investor Suitability and Pricing Implications of Leveraged Structures

The preliminary pricing supplement discloses that the estimated value of approximately $885 to $925 per $1,000 face amount is materially below the 100% original issue price. This valuation gap reflects the cost of the embedded option features in the notes—specifically the 1.95x participation in upside returns and the 20% downside buffer. These option costs are deducted from the investor's initial capital, meaning investors pay full par price but receive notes worth approximately 88-93 cents on the dollar at pricing. The company did not explicitly state the option cost in basis points or percentage terms, but the valuation gap implies a cost in the range of 7-11.5% of par value.

The leveraged upside participation of 1.95x creates significant return potential but also concentrates risk, as investors are short volatility through the embedded downside protection floor. Investors accustomed to traditional debt instruments should recognize that these notes function more like hybrid equity-derivative products than conventional bonds. The promised maturity value depends entirely on index performance, and there is no coupon or regular interest payment—the notes do not bear interest, as stated in the preliminary supplement. This structure is suitable only for investors with a strong conviction about positive equity market performance, reasonable liquidity needs, and capacity to absorb potential total loss. The company did not provide recommended investor profiles or guidance regarding suitable investment horizons within the preliminary pricing supplement.