NEW YORK (Reuters) – Lehman Brothers Holdings Inc has put itself up for sale as its survival was called into question, and its shares tumbled about 42 percent.
Chief Executive Dick Fuld has stepped up his efforts to sell the whole firm, instead of just a piece of its business, sources familiar with the situation said on Thursday. Bank of America Corp is said to be one possible suitor, according to the Wall Street Journal.
Bank of America and Lehman declined to comment.
Struggling to cover losses from toxic real estate investments, the investment bank rushed to raise desperately needed cash in a plan broadly outlined by Fuld on Wednesday.
Still, investors remained gloomy as the steady stream of grim tidings and the dearth of information from the company stoked fears that some of Lehman’s clients and trading partners might take their business to more stable firms.
“Although many investors thought it would be avoided, customers of Lehman Brothers are becoming more and more skittish in their dealings with them,” said William Lefkowitz, options strategist at vFinance Investments, a brokerage firm in New York. “If this fear continues to grow, that could lead to the demise of Lehman Brothers,”
Six months since the collapse and eventual fire-sale purchase of investment bank Bear Stearns, confidence in the Wall Street business model has faded.
The stock closed down $3.03 to $4.22 Thursday after falling as low as $3.80 earlier in the day. They have lost more than three-quarters of their value since Monday and more than 90 percent from their 52-week high of $67.73 last November.
The crisis came on a difficult day for Lehman, the 7th anniversary of the September 11 attacks that severely damaged its headquarters across the street from the World Trade Center.
‘LACK OF FAITH’
Lehman — founded in 1850 by three German immigrants who traded cotton — garnered most of the market’s attention.
With Thursday’s stock fall, its market capitalization fell to $2.93 billion, behind once much-smaller companies like Huntington Bancshares Inc at $3.04 billion and Raymond James Financial Inc at $3.8 billion. Goldman Sachs Group Inc has a market cap of $61.8 billion.
“As much as they try to … calm investors down, investors don’t have yet the answers they need,” said Rose Grant, managing director of Eastern Investment Advisors. “There’s a complete lack of faith, lack of confidence and lack of trust.”
The company reported a record quarterly loss of $3.9 billion on Wednesday, and said it would spin off distressed assets and sell a stake in its asset management business. But details about the size, scope and timing of the potential sales were few — leading to fresh fears about its plans.
“We thought getting news out of Lehman was going to clear the dark cloud, but it really doesn’t. It just leaves us with a company that’s limping along, that may or may not make it,” said Arthur Hogan, chief market analyst at Jefferies & Co.
The company has written down billions of dollars in assets in the last year — largely holdings of complex mortgage-backed securities. And over the last several months, the bank has been battling rumors of defecting clients and talk of a takeover at a low price.
“It’s unfortunate that we’re in the kind of position now where events can take over. The stock is telling us that Dick Fuld is running out of options,” said Michael Holland, founder, Holland & Co, which oversees more than $4 billion of investments. “Unfortunately for Fuld, who has been very adamant about keeping Lehman independent, he has to find a partner now, someone to acquire them.”
One possible suitor, Goldman Sachs, is not looking to buy Lehman, sources familiar with the situation said, reflecting concerns that integrating two big investment banks would be too disruptive.
Lehman’s survival may hinge on the sale of a 55 percent stake in Neuberger Berman, its asset management business. But not everyone is confident a deal will be consummated.
“We are not even sure that the auction process for 55 percent of their asset management group is going to work because the people that win the auction need to find the money to buy it,” Hogan said.
While Lehman’s 25,000-plus employees, who own about one-third of the company’s shares, anxiously waited for word on their future, other businesses near its new midtown Manhattan headquarters were also concerned.
Lehman used to hold up to three corporate events a week at nearby Tonic Restaurant and Bar until earlier this year, then they cut back, said Joseph Jacobino, director of marketing and sales at Tonic.
“They scaled back dramatically — to none,” he said. “It was a significant loss for us.”
For some, though, the problems have been a boon. Alison Ryan, a bartender at Tonic, said the last few days have been busy, as laid-off Lehman workers toasted each other.
By Patrick M. Fitzgibbons