Lehman (LEH) Confusion Pounds Stock - Update
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As usual, confusion was surrounding embattled investment bank Lehman Brothers (NYSE: LEH) today and the stock looks like it badly wants to trade to toddler-levels (below $5).
Earlier today, there were reports out of Dow Jones News that Korean regulators said talks with savior Korea Development Bank have ended. A later report from Reuters refuted this, saying Korean regulators denied they have commented on developments between KDB and Lehman.
No one seems to quite know what is going on with Lehman, which has investors very nervous.
There have been a few possible scenarios for Lehman, but with write-offs mounting-up investors want to see something before the company announces third-quarter results next week. One scenario for Lehman is to go with a 1980s 'good bank-bad bank' model, shifting $32 billion in commercial mortgages and other assets into a new company and getting investors to take a large stake in the spin-off. Lehman could also sell its Neuberger Berman investment management unit, which may be the easiest thing to sell but takes away major earnings power from the company.
Shares of Lehman closed the day down nearly 45% to $7.79.
Out of the Money puts, including those with $5 and $2.50 strike prices, were active on Lehman Brothers today, suggesting options traders are speculating the stock can drop further.
After the market close, Goldman Sachs and a number of other broker-dealers came out denying rumors that they refused to be couterparty to Lehman trades. Shares of Lehman gained 3.5% by 4:48PM ET of the after-hours session.
Earlier today, there were reports out of Dow Jones News that Korean regulators said talks with savior Korea Development Bank have ended. A later report from Reuters refuted this, saying Korean regulators denied they have commented on developments between KDB and Lehman.
No one seems to quite know what is going on with Lehman, which has investors very nervous.
There have been a few possible scenarios for Lehman, but with write-offs mounting-up investors want to see something before the company announces third-quarter results next week. One scenario for Lehman is to go with a 1980s 'good bank-bad bank' model, shifting $32 billion in commercial mortgages and other assets into a new company and getting investors to take a large stake in the spin-off. Lehman could also sell its Neuberger Berman investment management unit, which may be the easiest thing to sell but takes away major earnings power from the company.
Shares of Lehman closed the day down nearly 45% to $7.79.
Out of the Money puts, including those with $5 and $2.50 strike prices, were active on Lehman Brothers today, suggesting options traders are speculating the stock can drop further.
After the market close, Goldman Sachs and a number of other broker-dealers came out denying rumors that they refused to be couterparty to Lehman trades. Shares of Lehman gained 3.5% by 4:48PM ET of the after-hours session.
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