What price to buy Lehman?

[EllisWyatt]

As I recall from the Sep 10 CFO con call, LEH say their net leverage ratio is currently 10x, a reduction from 12x last quarter.

Their last 10-Q, at May 2008, says that their gross leverage ratio is 24x.

This is in sync with what you're saying.

According to the 10-Q:

Gross leverage ratio is computed by dividing assets by stockholders' equity.

Their net leverage ratio is calculated as net assets divided by tangible equity capital.

They calculate net assets by excluding from total assets: (i) cash and securities segregated and on deposit for regulatory and other purposes; (ii) collateralized lending agreements; and (iii) identifiable intangible assets and goodwill.

They calculate tangible equity capital by including stockholders' equity and junior subordinated notes and excluding identifiable intangible assets and goodwill.

 

[IzzyfoShizzy]

LEH will probably take a huge dive today (especially if no buyer appears) because no one will want to take the risk of holding it over the weekend. Too much uncertainty.

Am I crazy for considering to jump in at some point today? Someone out there WILL buy this company. And if BSC could fetch $2 (later became $10 a share), I think LEH can get more than what it is trading at now ($3 a share).

What makes us think the Fed will allow LEH to disappear? I constantly see posts on this site of people encouraging to trade what they see and go with the trend. "Don't try and predict the future" everyone says.

Well what I see is the Fed always stepping in thus far to make sure the financial markets stay stable. Maybe it might be a good idea to trade that way...

 

[Cutten]

Just to update, I'm out of the stock. No follow-through after the intial rally, and then it fell back below the low of the panic day, so I'd rather just be flat into the weekend. Most importantly, the extreme panic selling has stopped, yet the stock is now lower. Looks as though the 25% bounce was it.

 

[Specterx]

Seems crazy to play with LEH, it could go bankrupt or get bailed out at any moment... if there's going to be a manipulated or insider's market it's going to be in LEH. Even if there is a takeover or govt bailout you have no idea what it'll do to the price of common shares, wiping out equity holders might be the whole point.

 

[taodr]

Heard on one of the channels, think was cnbc, Fuld recently turned down $27 a share. If true makes a bigger fool than Yang !

 

[Daal]

Quote from taodr:

Heard on one of the channels, think was cnbc, Fuld recently turned down $27 a share. If true makes a bigger fool than Yang !

if this is true that means that are buyers around and equity will not be wiped out. government should resist getting into the LBO business and another asset guarantee seems unlikely

 

[bwolinsky]

Quote from EllisWyatt:

As I recall from the Sep 10 CFO con call, LEH say their net leverage ratio is currently 10x, a reduction from 12x last quarter.

Their last 10-Q, at May 2008, says that their gross leverage ratio is 24x.

This is in sync with what you're saying.

According to the 10-Q:

Gross leverage ratio is computed by dividing assets by stockholders' equity.

Their net leverage ratio is calculated as net assets divided by tangible equity capital.

They calculate net assets by excluding from total assets: (i) cash and securities segregated and on deposit for regulatory and other purposes; (ii) collateralized lending agreements; and (iii) identifiable intangible assets and goodwill.

They calculate tangible equity capital by including stockholders' equity and junior subordinated notes and excluding identifiable intangible assets and goodwill.

Exactly, debt to total capital. Same as gross leverage. Would you want to wake up for weeks on end leveraged at 10:1? Does it really make it better to be leveraged 24:1?

I won't even try to put a value on it, because the book doesn't matter in this situation in light of the recent losses in their last quarter. Book will decline just as much from these losses, so it's not the best stock to pick right now.