Lehman Shares Spike Downward

Posted by John Carney, Sep 09, 2008, 11:45am

For a second day in a row, Lehman Brothers shares are getting pounded downward. The stock is off 30 percent as we file this entry, and had traded as low as $8 a share earlier this morning.

There are several conflicting reports rumors floating around that may be helping fuel the panic. Earlier, the Wall Street Journal reported that Korean regulators said talks between Lehman and the Korea Development Bank had ended. The KDB had reportedly been in on and off again talks about acquiring a stake in Lehman for weeks. A later report from Reuters denied this and Korean regulators denied they have commented on developments between KDB and Lehman.

The confusion certainly seems to be scaring off buyers. There is also a lot of speculation that Lehman may be permitted to actually collapse by a government concerned about moral hazard in the market following the rescues of Bear Stearns and the GSEs. Here's John Jansen's analysis:


There is some talk that they might truly be compelled to fold as the Treasury is currently busy frying other fish. They have had quite some time to right their ship (I think the ship metaphor is ok because it follows the fish fry) and not having done so they might be left to their own devices.Lehman CDS currently 420/440 after closing 320/330.


Update: MarketBeat reports: "Michael Schwartz, options strategist at Oppenheimer & Co., says the activity reflects a re-pricing of Lehman's shares without Neuberger."

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