Lehman Brothers shares dive after Korean bank talks end

September 9, 2008 by · Leave a Comment
Filed under: Industry News 

Another nail in the coffin for Lehman Brothers, it will be a sad day to see another great independent investment bank go down in flames or gobbled up by the J.P. Morgan Trust.  The stock dropped 45% on the news with over 90% of the value lost this year.  I will note that the report of the talks is be disputed but the truth will be out by end of day.

I wonder if Lehman is too big to fail as well?  It must depend on their counter-party exposure to credit-default swaps or CDS.  With the BIS reporting on the $1.44 Quadrillion dollars of this toxic stuff floating around, bankruptcy is one of the biggest risk during this trying time for the financial sector.

Release:

Lehman Brothers Holdings Inc. shares plunged to a new low Tuesday on a report that talks with state-owned Korea Development Bank ended without any deal for a badly needed capital injection.

The nation’s fourth-largest investment bank had hoped to secure a deal with the Korean fund before announcing third-quarter earnings on Sept. 18. Lehman is facing billions of dollars in losses from wrong-way bets on mortgage securities, and had hoped another round of capital raising would encourage investors.

Shares of Lehman dropped shortly after a Dow Jones Newswire report quoted the head of South Korea’s financial regulator as saying the talks had concluded. However, it appears that report itself is being disputed.

Yoo Jae-hoon, a spokesman for South Korea’s Financial Supervisory Commission, flatly denied any statement was made.

“We are not in a position at the FSC to broadcast how the deal is going,” Yoo told The Associated Press when asked about the report. “That is very improper.”

A spokesman for Lehman Brothers could not immediately be reached for comment, but in the past have declined to comment on similar speculation.

Lehman’s stock plunged as much as 45 percent in late-morning trading, and is down more than 90 percent this year. The stock fell as low as $8 before recovering a bit to $9.89, down $4.26 or 30 percent, at midday.

Source: AP

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