In times as recent as last week, the shares of Lehman Brothers ( one of the largest investment banking entity) nosedived almost 77% to reach levels which posted its biggest ever loss in its 158 year investment history. In wake of Lehman’s acquisition by another firm leading to its loss of independent identity the list of potential losers is huge. Topping the list are the employees of Lehman Brothers. The last count of these employees’s stood at a mammoth figure of 25K. 30% of the companies stocks are owned by its own staff members who now have a sad story to share. The recent turmoil in Lehman has resulted in a severe shrinkage of wealth of its staff members and the loss is being pegged at $15 billion of the total net worth of shares owned by its staff members.
Now this loss of personal wealth is further aggravated by the prospect of them losing their jobs as well. The news is equally grim for its horde of other shareholders. Anticipating a rebound in the economy in the near future propelled many of Lehman’s big investors to double their stakes. Amongst the list of its famous shareholders suffering huge losses now is Lehman’s number one share holder Alliance Brenstein LP hailing from New York who increased its stake by a huge 43% this year to reach 65.7 million shares. Even seasoned hedge fund managers of the likes of George Soros have not been spared from bearing the brunt. George doubled the size of his firm’s stake in Lehman Brothers to reach 9 million in the 3 month period ending 30th June. The damage does not end here and goes on to take a more vicious turn. Standing on the brink of suffering huge losses are the privately negotiated derivative contracts in tune of almost $44 billion signed by customers with Lehman who now only has $28 billion with him to offer in return.
But one’s misery is often the source of another’s joy. Travelling on same lines here are the other investment firms and individuals who hope to draw out maximum benefit from Lehman’s messy situation. The revenue of almost $59 billion posted by Lehman Brother’s last year will be up for grabs by these competitors with Morgan Stanley, Goldman Sachs and Merrill Lynch taking in the lion’s share. Also up for grabs will be the best parts of Lehman and will be eyed constantly by major investors or group of investors in wait for acquiring it at throw away prices.
Tags: Alliance Brenstein LP, George Soros, investment banking, lehman brothers, Lehman’s acquisition, share price of lehman borthers
Bank of America, the second largest bank in America in accordance to its asset size in a major development is all set to buy Merrill Lynch in a deal that has valued Merrill Lynch at a figure of US$ 29 per share. This deal has valued Merrill at US$ 44 billion which is almost half of the value that the investment firm was worth when it was at its peak performance last year. Through this deal Bank of America has added another feather to its hat which has lately been on a major acquisition drive. This particular corporate combination deal is been seen with much hope to find respite from the ongoing credit crisis. The bank was interested in this investment firm since long and was also speculated of showing interest in the investment firm of Lehman Brothers too. But the absence of a guarantee or a propped funding option on behalf of the US Federal regulators keeping in mind the risky state of assets Lehman Brothers has reached; the bank finally decided to pull back and not continue further with the Lehman option.
In other news, what is speculated to be fallout to this corporate inking, in the presence of limited options, Lehman Brothers have confirmed their intentions of filing for Bankruptcy. This filing will be carried out by the holding company without involving any of its several subsidiaries. Meanwhile the firm is still supposed to be on a look out for a deal regarding the sale of its broker-dealer operations as well as the sale options for its asset management unit. Lehman’s meltdown will mark the biggest implosion to hit the investment banking sector in nearly two decades and will take away nearly 25 thousand jobs in its fold. The US Securities and Exchange commission has given hope that it will work hard towards providing extensive protection to the customers of Lehman Brothers and will do whatever it can to minimize the impact or blow of this development on the customers of the company. These developments regarding Merrill and Lehman come only 6 months after JP Morgan was taken over by Bear Stearns. All these moves go on to suggest the volatile credit times hitting the investment sector at this point of time. The lack of confidence awakened by the financial crisis has lead to a drying up of liquidity which in turn has resulted in increasing borrowing costs and a subsequent tighter credit environment.
Tags: Bank of America, bankruptcy, lehman brothers, merger and acquisitions, Merrill Lynch
According to news coming in from sources, the Department of Treasury and the Federal Reserve in the US are in the process of initiating the sale of Lehman Brothers Holding Inc through a consortium comprising of private companies. Though with nothing nearing completion or finalization several possible outcomes have been speculated and the final deal is expected to be disclosed by the weekend. The troubled assets of Lehman Brothers have left potential buyers worried and concerned who are now hoping that the US government might intervene and help prevent the company from incurring any more losses. With a number of firms present in the market who have the potential of saving Lehman Brothers the only ominous question is that which of these firms will step up to the occasion.
Lehman Brothers have registered a third quarter net loss of almost $4 billion. This figure comes immediately after the firm suffered a setback of more than $5 billion of new write-downs found mostly on soured mortgage exposures. With the market thick with all these news the shares of Lehman Brothers registered a dip of almost 42% and were finally trading at $4.22 as on Thursday, September 11th, 2008. This downslide in its prices began ever since the company reported a huge loss in its third quarter which subsequently resulted in its shares being cut by several rating firms followed by a shake up amongst its elite executive group.
The chairman of Lehman Brother’s blames this downslide on the on weak sales and writes downs of commercial real estate assets and a slow moving real estate market. The firm has also announced its plans of selling off a majority of its stake in its investment division and diverting the funds towards strengthening of its newly formed publicly traded company. The company has also reported to have taken care of some key appointments in its fixed income international business setups.
Tags: lehman brothers, mrtgage backed securities, result of lehman brothers, sale of lehman brothers, stock price of lehman brothers