Lehman Shares Jump 14 Percent on Strong Response to Preferred Stock Offering

Lehman Brothers Holdings Inc., looking to quash rumors that it may be facing a liquidity crunch similar to the one that claimed rival Bear Stearns & Cos., said Tuesday that a planned stock offering had been boosted from $3 billion to $4 billion amidst “substantial interest” from investors. Via Bloomberg:

Investors paid $1,000 for each Lehman preferred stock, which can convert to 20.0509 common shares once the stock reaches $49.87, or 32 percent higher than yesterday’s closing price. “There’s a $4 billion bet that the shares are going to rise to that level,” said Andrew Corn, CEO of Clear Asset Management in New York, which owns Lehman shares. “They had to do it to not only quell criticism but also it seems they needed to raise capital. The market loves the fact that this has been done.”

No kidding. Lehman’s stock shot up after the announcement, and was at $43.05 when this story was published, up 14.37 percent. “The significant oversubscription for this deal demonstrates the confidence that investors have in Lehman Brothers,” said Erin Callan, the company’s CFO. “The success of the transaction is also reflective of the strength of the business model, the capital base and liquidity profile of the firm as we continue to successfully weather challenging environments.”

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