Lehman (LEH) Raises Too Much Money

Lehman (LEH) appears to have raised $6 billion from places like The New Jersey Division of Investment and Hank Greenberg’s C.V. Starr fund. It is a nice chunk of change, but it is very bad news that the brokerage had to raise that much.

According to The Wall Street Journal, Lehman’s loss for the last quarter will be about $2.8 billion. Not so long ago, estimates were for that number to be $300 million.

That leaves Wall St. wondering what the next shoe to drop will be. It is hard to imagine Lehman’s losses could be eight times greater than expected without results being very poor at Merrill Lynch (MER), Morgan Stanley (MS), and several other firms. Based on past results, Goldman Sachs (GS) might make it out with its skin intact.

Most of these firms put money into the same mortgage paper and corporate LBO loans to one extent or another. Lehman’s shares traded at a 52-week high of $82 and now sit at just above $32. It may have further to drop.

Why does Lehman need $5 billion? The answer is almost certainly because it is still bleeding in the current quarter and may be damaged more through the rest of the year.

The $5 billion is too much, as will be the next $5 billion.

Douglas A. McIntyre