Lehman to offer 3M shares to raise cash
Written on April 3, 2008
Shares of Lehman Brothers Holdings Inc. fell almost 3% in after-hours trading Monday, after the investment bank said it would offer up to 3.45 million shares of convertible preferred stock to boost cash flow and reduce debt.
Lehman (LEH, Fortune 500), the fourth-largest U.S. investment bank, will initially offer 3 million shares, and if there is strong demand, underwriters can buy an additional 450,000 shares.
Chief Financial Officer Erin Callan said in a statement the plan will reduce leverage — basically, reduce its reliance on borrowed money. Callan also said there was a "window of opportunity in the market" and "significant interest" from several investors.
Lehman’s decision to raise cash through a stock offering arrives just weeks after a cash-flow crisis at Bear Stearns Cos (BSR). that forced the Federal Reserve to step in and fast-track a buyout of the struggling investment bank by JPMorgan Chase & Co (JPM, Fortune 500).
Many of Lehman’s shareholders have been anxious freecreditreport. Of four remaining major Wall Street investment houses, Lehman is the most similar to Bear Stearns in terms of size, structure and exposure to mortgage-backed assets.
Shares of Lehman, having finished down 23 cents at $37.64 on Monday, declined another 98 cents, or 2.6%, to $36.66 in after-hours trading following the announcement.
Lehman’s first-quarter earnings report earlier this month came in better than analysts predicted. But given the volatility in the credit markets, investors are not yet assuaged that the bank will weather a financial crisis that has so far led to some $160 billion in asset write-downs for the global financial industry.
Lehman itself wrote down $1.3 billion in the third quarter, $830 million in the fourth quarter and $1.8 billion in the first quarter.
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