Lehman Brothers (NYSE: LEH) Is Not Dead Yet

The short-financial trade is tired, but maybe not dead yet. Today’s Financial Times reports that Lehman Brothers (NYSE: LEH) is trying to sell pieces of itself to foreign investors before having to report another US$3 billion loss in early September.

Lehman Brothers has already reported nearly US$12 billion in losses since the onset of the credit nightmare. Its stock has fallen by 85%. And the FT reports that talks to sell 50% of itself to the Korea Development Bank and China’s Citic Securities fell through because both bidders said Lehman’s asking price was far too high, given the distressed state of its assets.

You get the feeling Lehman Brothers is like a man so desperate for cash that he’ll sell certain vital bodily organs for cash. The commercial real estate portfolio is valued at US$40 billion. The wealth asset management group, US$10 billion.

The trouble is there aren’t many organs a man can really do without. You can part with a kidney and maybe some bone marrow, or other bodily fluids. But try to donate your brain, your heart, or your lungs and you’ll soon be a corpse, where the sum of the parts are worth more than the whole. Once people realise that, Wall Street is going to look a lot like this.

Dan Denning
Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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3 Comments on "Lehman Brothers (NYSE: LEH) Is Not Dead Yet"

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Coffee Addict
I have had Lehman “on watch” for the past 18 months. Dan is correct to indicate that the sum of the parts (for banks such as Lehman) are very significantly less than the whole. Selling off many of the parts will keep these parts alive and provide temporary liquidity for the core. Lehman’s managers always tout liquidity as a key goal. However liquidity is not the same as underlying profitability. Liquidity can only be applied to debt interest for so long – eventually an over geared, unprofitable enterprise will be bought out or go bust. Will Lehman find a buyer… Read more »
Coffee Addict

My predicted timing for Lehman’s demise was optimistic. I don’t have a crystal ball which is good enough to indicate exactly when a bank run will start so I shouldn’t have guessed. I am surprised that no other comments were posted.

lehmann is dead… rip if these banks were contributing as much to the economy as they think were, i doubt they would have gone under so fast. i dont understand why everyone thinks a particular bank adds such a lot of value to the economy that it cant fold… buckle under… go kaputtski… other banks can and will be created in response to market needs… why do we need to prop these monsters up? the problem seems to be in managing counterparty risk… what happens when you have bought an instrument from a bank and the bank no longer exists…… Read more »
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