Rumours take toll on Lehman stock
Shares of Lehman Brothers fell by nearly 10% in early New York trading on Thursday on rumours that the fourth largest US investment bank could see a run on the bank similar to what happened to Bear Stearns, traders said.
By Agencies |
NEW YORK: Shares of Lehman Brothers fell by nearly 10% in early New York trading on Thursday on rumours that the fourth largest US investment bank could see a run on the bank similar to what happened to Bear Stearns, traders said.
Declines in Lehman���s shares on Thursday are ���all being tied to fears of Bear Stearns���, said Robert Bolton, head trader for Mendon Capital Advisors in Rochester, New York. ���Does another broker dealer go the route of Bear Stearns with regard to their solvency and the like?���
A Lehman spokeswoman called the rumours ���totally unfounded���, which contributed to the stock taking back much of its losses. Kerrie Cohen, a spokeswoman for Lehman Brothers, said, ���There are a lot of rumours in the marketplace that are totally unfounded. We are suspicious that the rumours are being promulgated by short sellers of our stock that have an economic self interest.��� At midday, Lehman shares were down 4.28% at $40.67 on the New York Stock Exchange, after falling as low as $38.36.
The UK���s Times reported on March 19 that the US Securities and Exchange Commission (SEC) was probing whether hedge funds and other market players deliberately circulated false rumours about Lehman Brothers to push the company���s shares lower. Investors have been skittish about investment banking shares since the middle of the month when Bear Stearns Cos experienced a run on the bank amid fears that its mortgage exposure could leave it insolvent.
Other traders, who declined to be identified, echoed Bolton's assessment for the reason behind the drop in Lehman's shares.
In addition, large bearish bets on Lehman in options markets contributed to selling pressure, some traders said.
Lou Brien, a strategist with DRW Trading Group in Chicago, said there had been a rumour on Thursday that Lehman was close to making an announcement, which contributed to the shares selling off, but the announcement proved to be about the bank hiring a new co-head of global institutional distribution, after which shares recovered.
Declines in Lehman���s shares on Thursday are ���all being tied to fears of Bear Stearns���, said Robert Bolton, head trader for Mendon Capital Advisors in Rochester, New York. ���Does another broker dealer go the route of Bear Stearns with regard to their solvency and the like?���
A Lehman spokeswoman called the rumours ���totally unfounded���, which contributed to the stock taking back much of its losses. Kerrie Cohen, a spokeswoman for Lehman Brothers, said, ���There are a lot of rumours in the marketplace that are totally unfounded. We are suspicious that the rumours are being promulgated by short sellers of our stock that have an economic self interest.��� At midday, Lehman shares were down 4.28% at $40.67 on the New York Stock Exchange, after falling as low as $38.36.
The UK���s Times reported on March 19 that the US Securities and Exchange Commission (SEC) was probing whether hedge funds and other market players deliberately circulated false rumours about Lehman Brothers to push the company���s shares lower. Investors have been skittish about investment banking shares since the middle of the month when Bear Stearns Cos experienced a run on the bank amid fears that its mortgage exposure could leave it insolvent.
Other traders, who declined to be identified, echoed Bolton's assessment for the reason behind the drop in Lehman's shares.
In addition, large bearish bets on Lehman in options markets contributed to selling pressure, some traders said.
Lou Brien, a strategist with DRW Trading Group in Chicago, said there had been a rumour on Thursday that Lehman was close to making an announcement, which contributed to the shares selling off, but the announcement proved to be about the bank hiring a new co-head of global institutional distribution, after which shares recovered.
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