*UPDATE 2: Hank Greenberg tells Reuters through a spokesman that he plans to go through with his Lehman investment (he bought some of the $6B deal). This is positive, but it also means the deal hasn’t yet closed. Hank also did not mention whether he will make the investment on the original terms–or whether, in light of the subsequent stock collapse, he is demanding that Lehman give him a better deal.
*UPDATE: Stock has rallied off early plunge. The critical question here is the status of the $6B financing, which, yesterday, was rumoured to be in trouble. If it is closed, Lehman may have just hit its lows. Lehman needs to clarify this publicly as soon as possible.
EARLIER: Lehman Brothers (LEH) has ousted** CFO Erin Callan and COO Joseph Gregory, (CNBC first reported). Callan’s sacking is not surprising, given how the firm has destroyed its credibility in recent months. Gregory’s role in the collapse is not yet clear.
Three big questions remain:
- Where is CEO Dick Fuld and will he soon follow Callan and Gregory out the door? There’s only one place the buck finally stops, and if Fuld doesn’t immediately persuade shareholders that he has a firm hand on the tiller, he’s gone. Right now, however, this is the least of Lehman’s worries.
- What is the status of Lehman’s emergency $6 billion financing? Yesterday, the deal was rumoured to be in trouble, and if the rumours are true, Lehman’s existence may be threatened. Lehman needs to clarify immediately whether the deal has closed, and, if not, when it will close (and whether there is any issue with the closing now that the stock is about 25% below the deal price). Lehman’s press release this morning did not mention the deal. It also had a “just another day at the office” tone that, in light of the current circumstances, was absurd.
- Will Lehman be able to stop the erosion of investor and client confidence? To say the firm faces a “crisis” is an understatement. Fuld needs to act immediately and aggressively, or Lehman could easily go the way of Bear Stearns.
**Amusing aside: To try to soften the blow to Callan and Gregory, Lehman is saying that they’re not getting fired–just demoted. Callan, for example, will be rejoining the firm’s investment bank “in a senior capacity.” Please. After a public execution like this, if Callan and Gregory have any self-respect, they’ll be gone in a week. (That is if Lehman hasn’t actually already canned them, which seems more likely. If you were Dick Fuld, would you want top lieutenants working for you who you had just publicly humiliated?).
Lehman Crushed Again on rumours $6B Deal in Trouble
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Lehman CEO Dick Fuld Should Go