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Lehman Ripe for Takeover as Market Cap Plunges Below $6 Billion

Source: http://feeds.feedburner.com/~r/USMoneyMorning/~3/387871557/
Posted on Tuesday, September 9th, 2008 | In Market Commentary
Contributed by: Money Morning (http://moneymorning.com) -

Lehman Bros. Holdings Inc.’s (LEH) risk of a potential takeover soared today (Tuesday) as its stock nosedived to its lowest level in almost a decade.

Once the fourth largest Wall Street investment bank, Lehman has seen its market capitalization shrink from over $47 billion at its stock’s 52-week high of $67.73 down to just $5.6 billion at today’s new 52-week trading low of only $8.00 per share.

By 12:40 p.m. in New York, Lehman shares had recovered slightly to trade at $8.99, down over $5 for the day with a decline of almost 40% on reports that negotiations for a capital infusion from state-controlled Korea Development Bank (KDB) had ended without plans for investment.

Korea’s Financial Services Commission refused to confirm that talks with Lehman had ended, but the report was enough to send Lehman shares into a tailspin.

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Richard Bove, an analyst with Ladenburg Thalmann, has been critical of Chief Executive Richard Fuld’s management of the beleagured investment bank for quite some time. Two weeks ago Bove suggested Lehman could find itself the victim of a hostile takeover if Fuld was not able to negotiate an emergency liquidity boost.

Buyers seem to believe that Lehman is overvaluing its assets and refuse to hit the bid,” Bove wrote in a research note, BusinessWeek reported. “The net result is no action.”

And as the list of potential saviors continues to dwindle, so does investor confidence in Lehman Brothers.

After $8.2 billion in subprime credit-related losses and writedowns in the past 12 months, Lehman stock is down over 85% year-to-date and is 86.7% off its 52-week peak.

Hungry for substantive news of how Fuld plans to shore up Lehman’s $60 billion mortgage-related portfolio, all investors have been offered so far is some management changes. But the clock is ticking and Fuld will have to face the music soon and come clean with his plans for the future of Lehman Brothers.

Lehman is slated to announce fiscal third quarter results early next week and shareholders will be looking for reassurance from Fuld and President Bart McDade that the bank has been able to sell assets or obtain necessary capital infusions to bolster a bleeding balance sheet.

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