Down 11 per cent in Monday trade – closing below $20 a share.
As Yves Smith has noted in the past, there’s still a lot of baggage at Lehman – and plenty of reasons still to be suspicious. The nature of the cash-raising “asset sales” the bank has boasted of is somewhat murky.
Whether true or not – of course – the opacity of it all is furtive ground for rumours. Bloomberg reported more acquisition talk yesterday. The question, though, being: why would this drive the share price down? A: a distressed bid?
Liquidity problems though, are not really an issue here: facilities at the Fed, forget not, put Lehman in a far safer position that Bear. A subject which, while we’re on, is worth is a little depth. Bear’s demise is a nice foil to Lehman’s current situation. Vanity Fair has just published its own epic account of the collapse. From which:
According to one vague tale, initially picked up at Lehman Brothers, a group of hedge-fund managers actually celebrated Bear’s collapse at a breakfast that following Sunday morning and planned a similar assault on Lehman the next week. True or not, Bear executives repeated the story to the S.E.C., along with the names of the three firms it suspects were behind its demise. Two are hedge funds, Chicago-based Citadel, run by a trader named Ken Griffin, and SAC Capital Partners of Stamford, Connecticut, run by Steven Cohen. (A spokesman for SAC Capital said the firm “vehemently denies” any suggestion that it played a role in Bear’s demise. A Citadel spokeswoman said, “These claims have no merit.”) The third suspect, at least in Bear executives’ minds, is one of its main competitors, Goldman Sachs. (“Goldman Sachs was supportive of Bear Stearns,” says a Goldman Sachs spokeswoman. “There is no foundation to rumors that we behaved otherwise.”)
Rumour-mongering short-sellers? It all sounds terribly British. There’s a lot to be said for Lehman’s relative strength though, and every sign late yesterday of a emerging Bear squeeze. Merrill Lynch analysts issued a buy note on the bank, with a price target of $31 a share.
We think near-term risk of incremental write-downs is balanced by solid liquidity and capital footing.
Lehman up 4 per cent in extended-hours trading.