Looks like Einhorn was correct……despite Lehman’s (LEH) proclamations to the contrary.
Lehman has raised $6 billion in capital in the past year, including $4 billion last quarter. It is now looking at the need to raise another $3 to $4 billion.
CFO Erin Callahan has been the public face of the company during the crisis and has made statements that will now come back to haunt her. The firm is saddled with billions of dollars of illiquid commercial real-estate assets and leveraged loans and is expected to face further write-downs on these portfolios.
The Wall St Journal reported today
“During the second quarter, Lehman was stung by hedges used to offset losses in real estate and other securities, according to people familiar with the matter. The firm bet that indexes tracking markets such as real-estate securities and leveraged loans would fall. If that happened, it would book profits that would make up some of its losses from holding these securities and loans.
However, in an unexpected twist, some of the indexes rose, even as the assets they were supposed to hedge against continued to lose value or stayed relatively flat. Lehman’s losses from both write-downs on assets and ineffective hedges will likely top $2 billion, people familiar with the matter said.”
Just over a month ago Callahan was on CNBC and said at the time they did not expect to need the last fund-raising they did.
Now additional funds and further shareholder dilution are being needed. Someone will pay and you cannot just sit back anymore and blame short-sellers “spreading rumors”. When what you alleged to be “rumor” starts coming true, it now looks as though you are the not being totally honest.
Watch Einhorn express his concern about the company. Bartiromo tries to refute Einhorn but he makes his point nontheless. Who is looking more accurate?
I think it may not be too long before Callahan joins the latest list of casualties.
Disclosure (“none” means no position):None
