Goldman Sachs Issues Autocallable Notes Linked to S&P 500 Futures Index With 18.65% Annualized Coupon Potential

Structure and Maturity Profile of the Autocallable Notes

The disclosure describes a structured product issued by GS Finance Corp. and guaranteed by The Goldman Sachs Group, Inc., designed to provide investors with exposure to a rules-based index tied to S&P 500 Futures contracts. The notes are expected to have an original issue date of July 29, 2026, with an expected maturity date of July 29, 2032—a six-year holding period for investors who do not experience an early redemption event. The notes are subject to automatic call provisions on quarterly observation dates, meaning investors may receive their principal plus accrued coupon and lose further upside participation if the index performs well enough to trigger a call on any January, April, July, or October coupon observation date between January 2027 and April 2032.

The filing states that the original issue price is 100% of face amount, meaning investors purchasing at the initial offering will pay $1,000 for each $1,000 in face value notes. However, the preliminary pricing supplement indicates that the estimated value of the notes at the time terms are set on the trade date (expected July 24, 2026) is expected to be between $885 and $925 per $1,000 face amount. This significant discount between estimated value and issue price reflects the embedded costs, fees, and risks built into the structured product, including the impact of leverage, the daily decrement, and the issuer's credit spread. The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Contingent Coupon Mechanics and Observation Schedule

The notes feature a contingent coupon structure that rewards investors only if the underlying index maintains a specified performance threshold on each monthly observation date. According to the disclosure, coupon observation dates are expected to be the 24th day of each month (with an exception for July 2032, which is expected to be July 26, 2032), commencing in August 2026 and ending in July 2032. If the closing level of the index is greater than or equal to 70% of the initial underlier level on any coupon observation date, investors will receive a coupon of $15.542 per $1,000 face amount on the applicable payment date. This translates to a monthly coupon rate of 1.5542%, or the potential for up to approximately 18.65% per annum if all monthly coupons are paid.

Critically, if the closing level of the index falls below 70% of the initial underlier level on any coupon observation date, the investor will not receive a coupon on the applicable payment date. This contingent feature means investors receive no payment during months when the index underperforms, creating a binary coupon structure rather than a guaranteed fixed return. The filing suggests that investors must monitor monthly performance closely, as the index's leverage mechanisms and daily decrement can cause significant volatility and deterioration over time, potentially causing the index to fall below the 70% coupon threshold even during periods of broader market stability.

Automatic Call Provisions and Early Redemption Risk

The notes incorporate automatic call features that allow for early redemption if the index performs sufficiently well on specified quarterly observation dates. The filing states that the notes will be automatically called if the closing level of the index on any call observation date is greater than or equal to the initial underlier level set on the trade date (expected to be July 24, 2026). Call observation dates are expected to occur on the coupon observation dates in January, April, July, and October of each year, commencing in January 2027 through April 2032. If the notes are automatically called, investors will receive a payment on the next payment date (expected to be the third business day after the relevant call observation date) equal to the face amount of the notes plus a coupon payment.

This automatic call feature creates a form of interest rate cap for the issuer and a potential opportunity cost for investors. If the index rallies significantly and breaches the initial level on an early call date, investors will receive their principal and accrued coupon but will not participate in further gains from the index. The filing indicates that the initial underlier level will be determined by the closing level of the index on the trade date, making the call threshold dependent on market conditions at the pricing date. Investors should understand that the call feature potentially limits upside participation, particularly if the index experiences sustained strong performance in the first one to two years of the notes' life.

Index Composition: Leverage, Decrement, and Volatility Adjustment

The underlying index—the S&P 500 Futures 40% VT Adaptive Response 4% Decrement Index (USD) ER—is not a passive benchmark but rather a complex, actively managed rule-based index with multiple layers of adjustment. The disclosure explains that the index attempts to provide exposure to the S&P 500 Futures Excess Return Index with a rules-based overlay that adjusts exposure on a daily basis. The objective is to create volatility-adjusted exposure to the S&P 500 Futures Excess Return Index coupled with calendar-based signals and price patterns, subject to a maximum exposure of 500% leverage and a maximum daily change in leverage of 100%.

A critical feature disclosed in the filing is the daily decrement of 4.0% per annum. The filing states explicitly that this decrement "is deducted daily, even when the index is not fully invested." The effect of the decrement is to offset positive returns and worsen negative returns on the index performance. The disclosure warns that "the inclusion of the decrement means the index will trail the performance of an identical index without such a decrement feature." Furthermore, the filing notes that the index may be significantly uninvested in the S&P 500 Futures Excess Return Index on any given day, meaning "will realize only a portion of any gains in the appreciation of the S&P 500 Futures Excess Return Index or the E-mini S&P 500 futures contracts on that day and any uninvested portion will earn no return."

Leverage Risks and Daily Rebalancing Constraints

The disclosure devotes substantial attention to the risks associated with the significant leverage embedded in the index construction. The filing states that "the index is subject to risks associated with the use of significant leverage" and warns that "investors should be aware that the use of leverage will magnify and accelerate any negative performance of the index." The notes' performance is therefore not merely dependent on the direction of the S&P 500 Futures market but also on the timing and magnitude of moves, since the index employs daily rebalancing with a 100% maximum daily leverage change cap.

The cap on maximum daily change in leverage, while intended as a risk control mechanism, creates asymmetric performance dynamics. The filing discloses that this cap "may result in the index leveraging up more slowly in the event of a market rally, and/or deleveraging more slowly in the event of a market sell-off, compared to an identical index that does not cap the amount of daily leverage change." This means that in periods of rapid market appreciation, the index may underperform a fully leveraged equivalent due to slower leverage ramp-up, while in periods of sharp declines, the index may underperform due to slower deleveraging. Combined with the daily 4% annual decrement and potential for significant uninvested cash exposure, these mechanisms create a complex performance profile that may diverge substantially from simple S&P 500 futures returns.

Maturity Payoff Structure and Principal Risk

At maturity, if the notes have not been automatically called, investors will receive a payment determined by the underlier return—the percentage change in the index from the initial level to the determination date (expected to be July 26, 2032). The filing discloses three possible maturity payment scenarios per $1,000 face amount. First, if the underlier return is greater than or equal to -30% (meaning the final index level is at or above 70% of the initial level), investors receive $1,000 plus the final coupon (calculated as described for the monthly coupon observation dates). Second, if the underlier return is between -30% and -50% (final level between 50% and 70% of initial level), investors receive $1,000 with no coupon. Third, if the underlier return is less than -50% (final level below 50% of initial level), investors receive $1,000 plus the product of the underlier return times $1,000.

The third scenario represents significant principal at-risk. If the index declines by more than 50% from its initial level, investors will receive less than $500 for each $1,000 in face value invested, with no coupon compensation. The filing states clearly: "You will receive less than 50% of the face amount of your notes and no coupon." This downside participation means that if the index experiences a severe bear market—which is plausible given the leverage and daily decrement mechanisms—investors can lose substantially more than the standard equity market decline. For example, an index decline of 60% would result in an investor receiving only $400 per $1,000 invested (before considering any coupons earned along the way).

Comparison to S&P 500 Index Performance and Financing Costs

The disclosure emphasizes an important distinction between the underlying index and the widely-followed S&P 500 Index. The filing states that "the S&P 500 Futures Excess Return Index tracks futures contracts on the S&P 500 Index and is likely to underperform the total return performance of the S&P 500 Index because of an implicit financing cost." This means that the index used for the notes incorporates a structural drag compared to buying and holding the underlying equities. The S&P 500 Futures Excess Return Index attempts to capture the performance of E-mini S&P 500 futures contracts, and "generally, the return on an investment in a futures contract is correlated with, but not the same as, the return on buying and holding the securities underlying such contract."

Additionally, the notes are tied to a modified version of the S&P 500 Futures Excess Return Index—specifically, one with volatility adjustment, leverage constraints, and a 4% annual decrement. These layers of modification create multiple sources of potential underperformance relative to a simple S&P 500 total return investment. The disclosure suggests investors should carefully evaluate whether the potential 18.65% annualized coupon (if all monthly coupons are received and the notes are not called early) justifies the complexity, leverage risks, decrement drag, principal-at-risk features, and contingent coupon structure relative to alternative equity or fixed-income investments.

Estimated Value Discount and Pricing Implications

The preliminary pricing supplement discloses a substantial gap between the original issue price (100% of face amount) and the estimated value of the notes at the time terms are set on the trade date. The filing states that "the estimated value of your notes at the time the terms of your notes are set on the trade date is expected to be between $885 and $925 per $1,000 face amount." This discount of $75 to $115 per $1,000 face amount reflects the embedded costs, including the issuer's credit spreads, the value of the leverage and decrement drag, the cost of the automatic call feature to the investor, the contingent coupon structure, and other embedded option values.

The disclosure further notes that Goldman Sachs & Co. LLC, which serves as the underwriter and market maker, would initially buy or sell notes (if it makes a market, which it is not obligated to do) at a price equal to approximately the estimated value of the notes plus an additional amount. However, the filing indicates that specific bid-ask spread amounts were not disclosed in this preliminary pricing supplement. Investors should note that the estimated value at pricing being substantially below the issue price implies a significant initial loss if the notes must be sold shortly after purchase, and that secondary market liquidity and pricing may vary significantly depending on market conditions and the issuer's credit quality.

Credit Risk and Issuer Guarantee Structure

The notes are issued by GS Finance Corp. and guaranteed by The Goldman Sachs Group, Inc. The disclosure states that investors should read the risk disclosures to understand "the credit risk of GS Finance Corp. and The Goldman Sachs Group, Inc., as well as risks associated with the index." While the guarantee by The Goldman Sachs Group provides a backstop, investors are relying on the creditworthiness of a major financial institution and should monitor developments that could affect Goldman Sachs' credit quality. The notes are not bank deposits and are not protected by federal deposit insurance.

The filing also notes that investors' returns will be affected by the performance of the index, the issuer's ability to make payments (subject to the guarantee), and secondary market conditions if they seek to sell the notes prior to maturity or early call. The discount between estimated value and issue price reflects, in part, the issuer's credit spread—a market-determined cost that compensates investors for the credit risk of GS Finance Corp. and its parent guarantee. Changes in credit spreads, interest rates, or market conditions could affect the value of the notes in the secondary market.

Distribution, Pricing Discretion, and Secondary Market Considerations

The preliminary pricing supplement indicates that additional notes may be sold after the initial offering at issue prices and underwriting discounts that may differ from the amounts disclosed for the initial sale. The filing states that "the return (whether positive or negative) on your investment in notes will depend in part on the issue price you pay for such notes." This means that investors purchasing notes on the secondary market at prices different from the original 100% of face amount will have different economic outcomes compared to initial subscribers. Secondary market purchases at a discount to face value would improve potential returns, while purchases at a premium would reduce them.

The disclosure indicates that Goldman Sachs & Co. LLC or its affiliates may use the prospectus in market-making transactions after the initial sale and that unless otherwise informed, investors should assume any post-initial-sale transaction in the notes is a market-making transaction rather than a direct new issuance. This distinction matters for pricing and the treatment of costs, though the specific bid-ask spread ranges for secondary market transactions are not disclosed in the preliminary supplement.