How do you get investors to take everything you say with a grain of salt? Behave the way Lehman Brothers (LEH) has over the past six months:
“We took care of our full-year financing needs at that point.”
– Erin Callan, Lehman CFO, on the firm’s $1.9 billion preferred stock deal in February.
“We have not changed our view on our real need for capital, but we have changed our view from a perception perspective.”
– Erin Callan, Lehman CFO, on why the firm decided to raise $4 billion of capital two weeks later.
Lehman told [shortseller David Einhorn] it booked a $400 million to $600 million gain on [an Indian company called] KSK in the first quarter. The manager said Ms. Callan told him Lehman marked up its holding because a new investor had taken a stake in KSK at a valuation above Lehman’s.
Ms. Callan said this other investment was part of a financing round in anticipation of an initial public offering, according to Mr. Einhorn. After Mr. Einhorn further questioned the valuation process, he says Lehman changed its story.
Lehman emailed him, he said, saying the firm had revalued its KSK stake based on an “expected” pre-IPO financing as well as other factors.
– WSJ account of exchange between David Einhorn, a Lehman shortseller, and Erin Callan, Lehman CFO
“Mr. Einhorn cherry-picks certain specific items from our quarterly filing and takes them out of context and distorts them to relay a false impression of the firm’s financial condition which suits him because of his short position in our stock.”
– Lehman spokesman on shortseller David Einhorn’s suggestion that the firm had not taken a large enough writedown on its CDO positions.
Lehman raises another $6 billion, $4 billion of which comes in the form of a highly dilutive common stock offering, and takes a $2.8 billion loss (on, among other problems, asset write downs).
See Also: Lehman CEO Dick Fuld Should Step Down
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