Independence Day: Why Lehman's Insistent Independence Is Not Reassuring

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Shares of Lehman Brothers traded up this afternoon after Morgan Stanley said it saw scenarios where Lehman's stock could rise as high as $30 from it's present $20 levels. But concerns about its future linger, both inside the firm and with investors. Many at Lehman Brothers are concerned that chairman and chief executive Dick Fuld's insistence that the company remain independent and resistance to further deleveraging could be foreclosing important options for the company's future.
In the era of increased capital requirements and regulations that many foresee for Wall Street, consolidation may be the only way for investment houses such as Lehman to survive and thrive. But Fuld's very public statements, backed up recently by Dick Bove's assessment, may be closing off that avenue. If a merger with or acquisition with another financial institution does become necessary in the future, Lehman could be in a far weaker position.
This sentiment is echoed by both Lehman insiders and investors. Of course, those owning shares of Lehman might be making these statements in order to create an acquisition-expectation premium in the stock, so they should be viewed with caution. As crazy as it might seem, it's not just short-sellers who can benefit from gossiping about financial stocks.

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