Lehman Brothers Holdings Inc. (NYSE: LEH) has in effect set itself up for a future takeunder, or so its pricing and trading seems. The business itself has few proprietary operations, and all of its assets walk in the doors early in the morning and leave at night.
The investment banking and trading firm is raising approximately $6 billion to shore up its balance sheet. It is a solid amount of capital, but it is very bad news that the brokerage had to raise that much. Lehman's loss for the last quarter is now reported as about $2.8 billion. Not so long ago, estimates were for that number to be $300 million.
That leaves Wall Street wondering what other firms are facing. It is hard to imagine Lehman's losses could be eight times greater than expected without results being very poor at other firms trading and investment banking firms.
Lehman likely needs this capital because is still bleeding in the current quarter and may be damaged more through the rest of the year. The company may come out and say that it doesn't need any more capital and that this is it, but we have heard that song over and over. In fact, on Wall Street 2008 may be the year of "Brother can you spare a few billion in change?" for major investment banks and lending institutions.
Most firms on Wall Street put money into the same mortgage paper, LBO loans, CDOs and CLOs, and other derivatives to one extent or another. Lehman's shares traded at a 52-week high of $82.00. In mid-May, it was trading in the mid-$40's. Lehman closed at $32.29 Friday. Shares are trading around $29.50 or $29.60 in pre-market after having traded around $28.00 in earlier pre-market trading.
Lehman plans for a takeunder?
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