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Lehman Brothers (NYSE: LEH) Knows How Badly They Are Messed Up

Contributed by: Martinas B.
Date: 17 Jun, 2008

Here at HotStocked, we've been glued to Lehman Brothers (NYSE: LEH) now for quite a while. Yesterday, the U.S fourth largest investment bank posted an almost $3 billion loss as was forecast earlier.

So, it seems that Lehman Brothers knows how badly it is in trouble; that's a good thing. It is the largest loss since the IPO in 1994. Lehman is indeed having some problems inside as two top executives had to leave their positions and $6 billion in new equity caoital was needed to ease the situation.

The company's CEO, Richard Fuld blamed himself for losing the fight against the tricky market conditions and admitted the company does not plan to raise more capital.

"This is my responsibility," Fuld declared. "We made active decisions to deploy our capital, some of which in hindsight were poor choices because we really didn't act quickly enough to the eroding environment."

Lehman's loss for the first quarter totaled $2.87 billion, or $5.14 per share. Last year the company made a profit of $1.16 billion.

The company's net revenue was negative $668 million, compared with revenue of $5.5 billion a year earlier mainly due to the write-downs. Some observers agree that Lehman's business plan is likely similiar to Bear Stearns, which in March was rescued by JP Morgan (NYSE: JPM).

Yesterday, the company's shares saw a surge and closed at $27.20. Today the shares are trading in a range of $26 - $28 per share. Hopefully, the stock has stabilized at that level, which is down about 68% from the 52 week high and is about $7.00 above the 52 week low, which occurred last week.