Lehman raises $4 billion
Lehman Brothers (LEH) raised $4 billion in a stock offering Tuesday, quelling fears of a cash shortage at the fourth-largest US investment bank due to the ongoing credit crisis. The capital infusion follows similar moves by other banks hit with billions of dollars in writedowns of mortgage-related assets since mid-2007.
Lehman's shares rose more than 10% during trading, as the offering assured the market that one of largest U.S. investment bank had the support of major investors.
"The deal appeared to have gone pretty well. People feel comfortable with Lehman, unlike the situation around Bear Stearns," said Lee Delaporte, according to Retuers - director of research at Dreman Value Management.
A report by Morgan Stanley on Tuesday said the turmoil in financial markets was a product of the most serious banking crisis in 30 years. The report forecast a drop in revenue at investment banks of 20 per cent in 2008, on the back of a 60-per-cent decline in revenue from credit businesses.
Speculation that Lehman could suffer more writedowns has sent its share price down 40 per cent since February.
Lehman said late Monday the deal was not meant to shore up the bank's balance sheet against write-downs, but was instead meant to show critics that the market still has confidence in the U.S. investment bank.
Lehman's stock offering was increased from an initial 3 billion dollars due to high demand, which "demonstrates the confidence that investors have" in the bank, Chief Financial Officer Erin Callan said in a statement.
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