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Lehman Bombshell: Erasing Eight Years of Gains
Posted Jun 09, 2008 10:24am EDT by Henry Blodget in Investing, BankingFrom Clusterstock, June 9, 2008:
Lehman Brothers (LEH) is smart to raise another $6 billion, and the move will probably save it from succumbing to the same fate as Bear Stearns. Given the terms on which Lehman is raising the money, however--$28 a share for the common stock component--this is clearly a fire sale (despite Lehman's protestations as recently as late last week that it "didn't need" capital).
The firm's massive write-downs in Q2, moreover, show that it badly underestimated the state of its balance sheet and the size of the capital infusion it would need to get through the crunch.
Lehman's management, starting with CEO Dick Fuld, will likely continue to frame the firm's problems as an act of God--an unforeseeable "perfect storm" or "100-year flood" that management should be congratulated for surviving.
Please.
Companies can--and should--be built to survive storms, and Lehman apparently wasn't. The firm made its biggest mistakes when everything appeared to be going well--by taking on too much leverage and crappy debt. That the firm has reacted to the crisis with more urgency than Bear Stearns is fortunate, but this doesn't let management off the hook for getting into this mess in the first place.
Lehman's crisis has wiped out the past 8 years of stock gains, and the rescue will dilute current shareholders by up to a third. Lehman's management needs to take responsibility for that--by stepping down. Once they're gone. new management can begin to rebuild the firm's credibility.
See Also:
Lehman Q2 Disastrous, Credibility Destroyed--$6 Billion Enough?
Lehman Deathwatch: Analyst Says The Firm's Clients are Getting Nervous
36 Comments
- Monday June 09, 2008 11:24AM EDT
How can anyone take anything that HB says as serious. Hey HB, remember the dot-com when you were trashed at Merrill.
Yahoo! Finance User - Monday June 09, 2008 11:48AM EDT
what worked before doesn't now for these financial conpanies...just sucks how greedy they all got, now everyone else has to suffer.
Yahoo! Finance User - Monday June 09, 2008 12:17PM EDT
How can anyone believe anything that Lehman says after this string of outright lies? The whole edifice of the money "bidness" is beginning to look like a movie set.... $28... Where is Carl Icahn when you need him? :-)
- Monday June 09, 2008 12:24PM EDT
Another house of cards appears to be folding.......... Kinda like the current administration in DC, everything after "Hello" is a lie.
Yahoo! Finance User - Monday June 09, 2008 12:35PM EDT
"Lehman's crisis has wiped out the past 8 years of stock gains" ? Well thats ok because the pigs have already pocketed 8 years of big bonuses. Its the share holders that end up the loosers.
Yahoo! Finance User - Monday June 09, 2008 12:35PM EDT
Alright! It is obvious from analysts viewpoint that this mess all due to managements and they should all be fired. I could not agree more, but same as the analysts themselves. When market is good, they applaud managements having made the gutsy move, so that the results turned out to be very well, but now markets have turned south, the same analysts conclude now that the company has BAD managements and they should all step down or fired. What about these big mouth analysts, they can turn whatever way they want and think that their analysis are all correct? Shut up, analysts. Can any analyst let us know which investment institute is doing very well lately? If they are so right (analysts), they must be rich by now and they don't need to work.
- Monday June 09, 2008 12:36PM EDT
See some advice: Download the PDF: http://www.martinweiss.com/images/mw/publications/smr/410_jun08smr.pdf
- Monday June 09, 2008 12:51PM EDT
Someone needs to write a tell-all book .. Maybe when they have some time after this all blows over.. Maybe while they are in prison. That lucky someone will make some moo-lah.
Yahoo! Finance User - Monday June 09, 2008 12:54PM EDT
Hello Mr. Bernanke? Where are you? Its Lehman here. Hello? Anybody home?
- Monday June 09, 2008 12:55PM EDT
Management taking responsibility by "stepping down"?? How is that taking responsibility? How about management ponying up the money to cover some of these losses? If we don't start requiring management to take responsibility in a real way by giving up their salaries, these ponzi schemes will only continue I'm sick of reading about companies suffering staggering losses while the fat cat CEO's and other corporate bigwigs make out like bandits, They get their huge salaries and in some cases even huge bonuses, while the shareholders and workers take the hit. When are we going really hold management responsible and make them take the biggest hit? They are the ones who made the mess, so they should be the ones who suffer the greatest consequence.
- Monday June 09, 2008 12:57PM EDT
Two trillion-ish is indexed to the lehman indicies, I believe. Leh isn't going anywhere. A great time to fade the public and dollar cost average into the shares.
- Monday June 09, 2008 12:58PM EDT
Hey, don't worry they can just go to the fed and sell them all their bad paper. Got gold?? If not, why???????????????? This is the Weimar Republic revisited, just replace "War Reperations" with "Over the Counter Derivatives." The Fed will inflate us out of this mess and the citizens will pay for it all with a much lower standard of living. The US was trusted with a blank check (Bretton-Woods agreement) and we abused it for years, now comes the payback. All this is so clear and yet Ron Paul gets snubbed. I'm not saying that everything he stands for is in line with my beliefs, or even that we should go back to a gold standard, but some tough decisions need to be made. We are already bankrupt and chances are that the next administration will expand the welfare state. It didn't work for FDR and it won't work now.
- Monday June 09, 2008 01:00PM EDT
lehman looks like ten pounds of s**t in a one pound bag
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- Monday June 09, 2008 11:21AM EDT
Guess the 'big-boy club' couldn't keep their fake money game going on too long. They should all be jailed for destroying the American financial markets. I have absolutely no confidence in the stock market now since it's obvious that it is being manipulated for gains and market forces are no longer driving investments.