Shares of Lehman rose more than 5% on Wednesday, August 27, as rumors circulated that Lehman was narrowing the list of potential buyers for its investment management division. Selling the division, which includes the respected Neuberger Berman, would let Lehman raise capital without issuing new shares.
On July 15, 2008, the SEC announced a temporary rule limiting the ability of traders to short Lehman shares. The new rule, to be in effect from July 21 until at least the 29th, requires that traders to actually hold shares of Lehman before short selling them. This prevents what's known as "naked short-selling", where traders never actually borrow and sell the shares involved.
Energy pricing company Platts (a subsidiary of McGraw Hill) suspended Lehman from its oil trading platform on concerns over the firm's creditworthiness. As a result, Lehman will be unable to trade some oil contracts.
Lehman Brothers released its second-quarter earnings statement on June 16, 2008. As announced a week earlier, the firm posted a $2.8 billion loss, though it did reduce its mortgage holdings by 20% in an attempt to stem further losses from the credit market fallout.[1]
Lehman Brothers shares fell for a consecutive day amidst writedown fears by removing Erin Callan (CFO) and Joseph Gregory (COO). Despite a rise in the S&P, DOW, and NASDAQ, LEH fell over 4%. However, on the same day, Lehman raised $4 million of capital from investors to ease the woes of their balance sheet.
Shares of Lehman Brothers plunged 13.6 percent on Wednesday, bringing their total loss in the past four days to more than 25 percent, on concerns about the potential for further write-downs and investors' declining confidence in the investment bank's management.
The stock's latest drop followed a newspaper report that Lehman could seek more capital after raising $6 billion on Monday, and a downgrade by a prominent analyst. Shares of the fourth-largest investment bank fell to $23.75, their lowest close since October 2002.
In a conference call on Monday, June 9, 2008, Lehman Brothers CFO Erin Callan announced that the firm expected to post a second-quarter net loss of $2.8 billion on -$600 million in net revenue. This was Lehman's first quarterly loss since it went public in 1994. In addition, the firm plans to raise $6 billion in new capital, $4 billion from the sale of 143 million new shares of common stock and $2 billion from the sale of preferred shares.[1]
On June 3, Lehman Brothers Treasurer Paolo Tonucci said that the firm's liquidity had risen by more than $6 billion during the second quarter of 2008 to more than $40 billion total. Also, Tonucci denied claims that Lehman had borrowed money from the U.S. Federal Reserve under a new program aimed at lending directly to brokerages and investment banks.[1]
WSJ reported on 6/2 that Lehman was seeking to raise money - possibly from firms in South Korea, fanning speculation that the firm's balance sheet is weaker than investors realize (due to fallout from the subprime lending criss).
Concerns that Lehman would be the next Bear Stearns - which sold to JPMorgan for pennies on the dollar over the weekend - sent stock plumetting.
Lehman Brothers announced that it was increasing its annual common stock dividend by 13% for the year. Additionally, the firm authorized the continuation of its common stock repurchase program for up to 100 million shares.
Lehman Brothers announced earnings of $886 million for the fourth quarter of its fiscal year, a 12% drop from the same quarter in 2006. Write-downs of $830 million in its fixed-income division hit total net income for the quarter, but analysts had expected a larger decline in net income before the release.
An analyst at Goldman Sachs lowered his target price for Lehman's stock to $70 from $71.
At the Merrill Lynch Banking and Financial Services Investor Conference on November 14, 2007, comments from Lehman's co-Chief Administration Officer on the firm's footing sounded upbeat. In the conference, co-CAO Ian Lowitt stated that Lehman had decreased its loan commitment by $17 billion since its 3Q earnings release, that the company did not own or sponsor any SIVs (which have been involved in the subprime fallout), and that it did not expect large write-downs on subprime holdings. In fact, Lehman may actually make money where competitors are losing by shorting CDOs and other risky investment.
On November 1, Citigroup announced further potential write-downs on subprime-related holdings, in addition to the $6 billion included in its third-quarter earnings report. This move led to speculation about the extent of other financial firms' exposure to subprime fallout, sending stocks in the sector, including Lehman's, downward.
Having avoided the large write-downs of its peer firms, Lehman announced on October 29, 2007, that it had established a $3 billion fund to purchase leveraged loans that banks are selling at heavily discounted prices. This indicated Lehman's belief that subprime-related devaluations may be near their end, making it a good time to buy in at low prices.
On Tuesday, September 18, 2007, Lehman Brothers released its earnings statement for the third quarter of 2007. The company's net income of $887 million and diluted earnings per common share of $1.57 were down 3% and 2%, respectively, from the same quarter in 2006. Despite these decreases, Lehman's performance exceeded many analysts' expectations, leading to the 10% jump in its stock price.
General uncertainty about the condition of the economy and debt market sent shares of investment banks down in the U.S. The sell-off came on the heels of an announcement by Goldman Sachs that it had pumped $3bn into one of its ailing hedge funds.
Lehman announces it will more than double the size of its next private equity fund and is targeting
Lehman increases its annual common stock dividend by 25% and authorizes the repurchase of up
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