Lehman shares fell to their lowest level in nearly a decade on Tuesday amid growing concern that Wall Street's fourth-largest investment bank would be unable to raise needed capital in the wake of huge losses.
The securities firm has been seeking to boost liquidity after suffering $8.2 billion in write-downs and credit losses since the financial crisis began last year.
Lehman had hoped to find a major investor before announcing third-quarter results Sept. 18, when it is widely expected to take another round of steep losses.
Prashant Bhatia, an analyst with Citigroup, said Lehman could release details about the third quarter in the next day or so.
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"At that point, we expect more clarity around where they are in terms of both earnings for the quarter and any strategic initiatives," Bhatia said. "A pre-announcement will likely be a catalyst to stabilize the stock."
Lehman could report a loss of between $2 billion and $4 billion, according to analysts. That would be on top of a $2.8 billion second-quarter loss, which was the first since Lehman spun off from American Express in 1994.
In addition, Lehman Brothers is also working to quell criticism from major credit rating agencies. On Tuesday, Standard & Poor's put Lehman's debt on CreditWatch Negative because of the steep stock decline, which means the agency may lower the company's ratings within months. Such a move would increase the amount of money Lehman pays to issue debt.
"The CreditWatch listing stems from heightened uncertainty about Lehman's ability to raise additional capital, based on the precipitous decline in its share price in recent days," said Standard & Poor's credit analyst Scott Sprinzen.
The steep decline in Lehman's shares began shortly after Dow Jones Newswires reported that the head of South Korea's financial regulator said talks about a possible investment had ended. Lehman Chief Executive Richard Fuld had been in negotiations with state-owned Korea Development Bank for several weeks about a capital infusion.
However, it appears that report itself is being disputed. Yoo Jae-hoon, a spokesman for South Korea's Financial Services Commission, flatly denied any such statement was made. He said the regulator was "not in a position" to "broadcast how the deal is going."
Mark Lane, a spokesman for Lehman Brothers, declined to comment. A spokesman for KDB could not immediately be reached for comment.
Hard Hit by Credit and Mortgage Markets
Like other investment banks, Lehman has been hit hard by deterioration in the credit and mortgage markets since the middle of 2007. Global banks during the past year have lost more than $300 billion from mortgage-backed securities and other risky investments.