Lehman Tumbles, Soros Buys in Big
Lehman Brothers, the fourth-largest U.S. investment bank, has seen its shares drop precipitously, leading many to speculate that the firm is headed for bankruptcy.
Don’t count hedge fund legend George Soros among the doubters. The man who once made $1 billion betting against the pound has lifted his stake in Lehman to 9.47 million shares as of June 30 from only 10,000 shares three months earlier.
The heavy buying, which Soros revealed in a filing with the Securities and Exchange Commission, gives him a 1.4 percent stake in the securities firm.
Clearly, most investors disagree with Soros. Lehman shares have tanked 79 percent this year, to $12.02 per share, as the firm continues to suffer from its inventory of soured mortgage securities.
Just today came news in the Financial Times that Lehman held secret talks earlier this month to sell up to 50 percent of its shares to South Korean or Chinese investment firms.
Lehman clearly was unable to reach an agreement with either government-owned Korea Development Bank or China’s Citic Securities.
Lehman faces growing pressure to procure funding, as analysts say its earnings report next month could well include write-downs of $4 billion, bringing the firm’s total to $12 billion going back to last year.
Lehman also is looking at dumping its $40 billion commercial real estate portfolio, which is littered with damaged properties, and its money management division, which includes Neuberger Berman.
That division may be the firm’s most valuable asset. Analysts peg its value at up to $10 billion.
So selling it would be a double-edged sword: the sale would bring hefty revenue but leave the firm with weaker holdings.
Still, none of this has been enough to deter Soros. He has declined to comment on the reasons for his purchase.
moneynews.com/streettalk/soros_lehman_buy/2008/08/21/124019.html