Will Lehman Brothers Survive Another Round of Rumors?
2019
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Rumors were swirling about another major Wall Street player on Monday as Lehman Brothers Holdings Inc. stock fell 11 percent.
The stock reached the lowest level it had seen since 2000 as the Street's second smallest Wall Street firm was the subject of speculation that it was in trouble and, like Bear Stearns, might have to sell itself off for a bargain-basement price.
Traders and investors drove the stock down from 22.47 to 19.81 although it recovered by 4.2 percent in after-hours trading, mostly because of a recommendation Morgan Stanley made to its investors that the stock should have a target price of $31 in any acquisition.
Lehman was not alone in having a tough in an otherwise slightly positive market. Many financial stocks were driven down by worries about what may come out in second quarter results due this month.
Insiders were insisting that the company was not a candidate for sale nor was it near bankruptcy. Others were suggesting that the company, if necessary would prefer to remain independent but sell off 20 to 30 percent of the firm to private equity firm Blackstone.
During the second quarter that ended Monday Lehman stock took a 47 percent thumping and is down 70 percent for the year. In June the company announced a $2.8 billion loss and a fresh infusion of $6 billion in capital from the sale of stock. The latter was also done to stave off rumors that Lehman might be headed for the humiliation of a Bear Stearns-like fire sale.
In June, in an attempt to right the boat Lehman replaced its Chief Executive Officer and its CFO. On Monday the new CEO, Richard S. Fuld was attempting to convince institutional investors that Lehman was secure and in no danger of a sale. Most analysts agree, however, that the holding company still holds a disproportionate exposure to the mortgage market than its larger competitors.
Lehman's problems on Monday were exacerbated by the fact that it was the end if the quarter, a time when mutual fund managers dump losers so they don't have to report them to their investors.
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