Lehman hits 8-year low on talk of sale

July 01, 2008|By Bloomberg News

Lehman Brothers Holdings Inc. fell to an eight-year low yesterday on speculation the fourth-biggest U.S. securities firm could be sold for less than its market value, traders said.

Lehman lost $2.44, or 11 percent, to $19.81 in New York, the lowest since May 2000.

"We're hearing that there may be a possibility of Lehman being taken over," said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $6 billion in San Antonio. . "There hasn't been any positive news on this firm for the last couple weeks, and the value of the deal might not be in the best interest of Lehman shareholders."

Andrew Gowers, a Lehman Brothers spokesman, said the company's policy is not to comment on rumors.

Richard Fuld, Lehman's chief executive officer, said June 16 that the company didn't need to be acquired.

"With this franchise, strength and power, we can go it alone," Fuld said. "But I have also said that we are a public company and if there is another model, or more importantly someone comes forward that we believe can create more shareholder value than our model can create, I clearly have the obligation to take that to the board."

Fuld told executives at Putnam Investments that his firm has enough money to remain independent and that the stock may be undervalued, Putnam's Kevin Cronin said after meeting with Fuld and Lehman President Herbert McDade yesterday in Boston.

"They have a strong desire and intention to remain an independent firm," said Cronin, who helps oversee $180 billion as Putnam's head of investments. "They're disappointed with the stock price and they think it's undervalued relative to their earnings and revenue potential."

Cronin said his firm owns Lehman shares, bonds and convertible stock. Putnam held 4.58 million shares as of March 31, according to Bloomberg data.

Lehman plunged 70 percent this year after reporting the first quarterly loss in its history and selling $6 billion of stock to shore up its funding. The Securities and Exchange Commission investigated whether traders spread false rumors about Lehman's solvency to profit from a drop in the shares, two people familiar with the probe said in March.

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