Traders are betting that Lehman Brothers could face Bear Stearns-style trouble after a series of reports yesterday suggested the bank is confronting writedowns and may look to raise as much as $4 billion in cash.
Meanwhile, published reports last night said that Lehman might be looking to sell a strategic stake to raise capital. According to the Financial Times, former AIG CEO Hank Greenberg and a Chinese state-run investment group are two potential suitors.
“Traders’ perception of risk is three times higher than [Lehman’s] peers and is approaching the same level as when Bear Stearns collapsed,” Jon Najarian, co-founder at OptionMonster told The Post.
Yesterday, Lehman was buffeted by rumors that it had recently borrowed from the Federal Reserve discount window, which was made available to investment banks and brokers in the wake of Bear’s implosion and takeover by JPMorgan Chase.
On Wall Street, a bank drawing funds from the Fed carries a stigma that a firm may be in trouble, but Lehman Treasurer Paolo Tonucci flatly denied the rumor via e-mail, adding that Lehman currently had access to more than $40 billion in capital.
Investors pushed down Lehman yesterday 9.5 percent to $30.61.
Lehman’s shares have lost nearly 20 percent this week, continuing a trend from last week on short-selling. Reports were that Lehman was actively buying back shares late in yesterday’s session.
While the performance of Lehman’s fixed-income shop has been a thorn in the firm’s side, sources tell The Post that Lehman’s equity division is expected to be down this quarter, as it faces softness due to the lack of activity from its hedge fund and retail clients.
Fending off Lehman’s naysayers has been the paramount focus of Lehman’s CEO Dick Fuld.
But despite a media campaign that has prominently featured new Chief Financial Officer Erin Callan, Lehman has not managed to avoid the negative spotlight.
“We’re in a market environment where sometimes perception becomes reality,” Standard & Poor’s analyst Diane Hinton, said during a call yesterday.
At this point, Lehman has been focusing largely on selling assets in a process known as delevering.
The bank has said that its assets-to-equity ratio declined to 27-to-1 from 32-to-1 since the first quarter.