Lehman Bolsters Their Balance Sheet
Originally Published In the News March 31, 2008 10:50 PM
Will Lehman’s capital raise put the rumors of their financial distress in the rear view mirror? Perhaps, but the shorts dogging this stock refuse to let go:
Lehman Brothers Holdings Inc (NYSE:LEH - News), an investment bank beset by rumors of not having enough funding, said it plans to raise $3 billion of capital to quash questions about its stability.
Lehman’s shares fell 2.8 percent to $36.60 in after-market trading after the planned convertible preferred share offer was announced, since it could result in more shares being issued. Chief Financial Officer Erin Callan told Reuters the deal was meant to end questions about the bank’s balance sheet, and the capital was not needed to offset the impacts of write-downs or losses.
“We have not changed our view on our real need for capital, but we have changed our view from a perception perspective,” Callan told Reuters. Reuters
The deal was oversubscribed over 3-to-1, but that is not good enough to silence the skeptics:
“This just makes me scratch my head. Why do this if you don’t have to?” said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati, which does not own Lehman shares.
Of course, Lehman might have been better off raising capital months ago when its cost of capital would not have been so dear. But that would have no doubt led to the rumors starting up and the stock sinking. Damned if you do, damned if you don’t.
Lehman to raise $3 billion to quash stability fears
Reuters
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