Lehman Brothers Inc. continues to crater as its shares lost another
$3.03 or 42%, closing at $4.22 for a bite-sized market cap of under $3
billion. At that price, if it weren't for the unfortunate business of
bad mortgage debt, Lehman looks like a tasty treat for a number of
healthier banks and firms.
Continue reading below
The day started with talk of Goldman Sachs Group Inc. as the
likeliest bidder. However, the Street, which having heard this rumor
before, responded unfavorably. Goldman's stock has been punished since
the beginning of the week in part because of this rumor. (Goldman
earnings look a little shaky this quarter as well.) Additionally,
unnamed sources at Goldman told Reuters Thursday afternoon that the
firm was not interested in Lehman. "Integrating two large investment
banks would be too disruptive," a source told Reuters.
Shortly after the Goldman comments were published, attention swung
to Bank of America Corp. as a buyer. The stories that appeared were
highly speculative; The Wall Street Journal ended up quoting
overheard conversations by Lehman employees. Still, it's not crazy
strategically. Lehman would give Bank of America two attractive
businesses, investment banking and Neuberger Berman LLC, without much
overlap. Neuberger Berman would provide BofA an opportunity to upsell
through its retail network, and Lehman's investment banking operations
would give Banc of America Securities LLC some much needed heft. BofA has
been trying to build a bulge bracket advisory business for over a
decade.
However, there are some catches. BofA is still digesting the
acquisition of mortgage giant Countrywide, which has been stop and go.
And then there's Lehman's slug of toxic mortgages. Unless the Federal
Reserve is willing to absorb those mortgages -- as it did for J.P.
Morgan Chase & Co. when it swallowed Bear Stearns Cos. -- there is no
reason to believe BofA, or any other bank, will have much to do with
Lehman, no matter the price.
Ah, but what about private equity? As the day thankfully ended, The Washington Post chimed in, citing regulatory sources, that the Fed was trying to sell Lehman to private equity. Can't wait for Friday. - Matthew Wurtzel
Troubled Wall Street
Prices at Thursday close |
| Name |
Price
at
Wed.
close |
Price
at
Thurs.
close |
Change |
Mkt cap |
| J.P. Morgan Chase & Co. |
39.4 |
41.65 |
2.25 |
143152.71 |
| Lehman Brothers Inc. |
7.6 |
4.22 |
-3.03 |
2930.38 |
| Merrill Lynch & Co. |
23.3 |
19.43 |
-3.87 |
29708.05 |
| Goldman Sachs Group Inc. |
157.59 |
157.03 |
-0.56 |
61839.17 |
| Morgan Stanley |
38.92 |
38.71 |
-0.21 |
42929.92 |
| Citigroup Inc. |
18.68 |
18.61 |
-0.07 |
101338.77 |
| Fannie Mae |
0.85 |
0.77 |
0.03 |
824.83 |
| Freddie Mac |
0.66 |
0.59 |
-0.07 |
381.74 |
| Bank of America Corp. |
32.4 |
33.06 |
0.66 |
150757.33 |
| Wachovia Corp. |
15.08 |
14.28 |
-0.80 |
30828.45 |
| Washington Mutual Inc. |
2.32 |
2.83 |
0.51 |
4826.17 |
| Wells Fargo & Co. |
31.70 |
33.85 |
2.15 |
112008.34 |
|
Source: The Deal
|
