Lehman shares plunge on capital concerns

Shares in Lehman Brothers Holdings Inc. tumbled another 12% on today, falling to their lowest level in nearly five years, amid concerns that the brokerage firm may need to raise fresh capital to offset a slew of anticipated mortgage-related losses, according to Crain's New York Business.

Lehman’s stock is down by more than 50% so far this year, a stunning drop for a firm that under long-time Chief Executive Richard Fuld was long considered one of Wall Street’s best-run firms.

But the shine has come off as investors have taken a closer look at Lehman’s balance sheet, which is saddled with mortgages – the debris left after the firm enjoyed a robust run as the industry’s leading dealer in subprime loans during the housing bubble.

Several analysts are now predicting the firm will report a loss when it posts second-quarter results later this month, and some bears are even questioning the firm’s viability as an independent entity.

On Monday, Standard & Poor’s cut Lehman’s credit rating and maintained a “negative” outlook for the firm, warning that it expects a “meaningful deterioration” in the firm’s second-quarter performance.

So far, Lehman has largely avoided the massive mortgage-related write-downs that have damaged it rivals, but short-sellers like Greenlight Capital’s David Einhorn have warned since at least December that the firm will ultimately have to pay the piper.

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